Cost-Benefit Analysis A tool for making economic trade-offs of environmental changes Prioritizing...
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Cost-Benefit Analysis A tool for making economic trade-offs of environmental changes Prioritizing between hydro power and wild salmon in the Umeå and Vindeln
Cost-Benefit Analysis A tool for making economic trade-offs of
environmental changes Prioritizing between hydro power and wild
salmon in the Ume and Vindeln river system
Slide 2
Background for the CBA The cost to reach different
environmental objectives and achieve different environmental
improvements can often be large. Societys resources are limited.
Hence it is important with tools to prioritize between efforts to
achieve a sound management of societys limited resources. A CBA
calculates and compares benefits and costs for firms and
individuals who are affected by a certain project to assess the the
social net benefits of it.
Slide 3
Based on study of wild salmon in the Ume and Vindeln river
system References: Hkansson, C., Johansson, P-O. & Kristrm B
(2005): Salmon and Hydropower: Dynamic Cost-Benefit Analysis, in
The Theory and Practice of Environmental and Resource Economics
Essays in Honour of Karl-Gustaf Lfgren. Eds: Aronsson, T.,Axelsson,
R. & Brnnlund R., Edwar Elgar, UK. Hkansson, C. (2009): Costs
and Benefits of Improving Wild Salmon Passage in a Regulated River.
Journal of Environmental Planning and Management, Vol. 52, pp.
345-363.
Slide 4
CBA to efforts to improve the migration of wild salmon in a
regulated river Many river who exit in the Baltic Sea have lost
their natural stock of wild salmon due to human interference.
Remaining stocks are reduced From its home river the salmon migrate
into the sea at the age of 1-4 years. There they will stay for up
to 3 years until they return to spawn. A problem are hydro power
plants which block the migration of the salmon to the spawning
grounds. The volume of water through the plant and the volume
through the old river bed is decided by electricity production
requirements. If a small share goes through the old river bed the
salmon cant find the right way to the fish ladder. According to
Lundqvist et al. (2005) 70% of the salmon cant find the way.
Slide 5
The studied area in the Ume/Vindeln river system Laxhoppet
Slide 6
Old river bed Fish ladder Salmon jump
Slide 7
CV-study to estimate willingness-to-pay (WTP) In the autumn of
2004 a mail survey was sent to 1192 Swedes, of which 59% responded
2 strata: northern and southern Sweden, which was then divided into
5 groups who got different versions of the WTP question Respondents
were asked about their WTP for an increase in the number of wild
salmon that migrate in the Vindeln river each year through the
construction of a new and more efficient fish ladder Responses
could be stated as an interval or a single number Intervals give an
opportunity to express uncertainty Payment was in the form of a one
time payment in the form of a tax Does the method to increase wild
salmon matter for WTP?
Slide 8
Versions of the WTP question As a baseline about 3000 salmon
migrate up the fish ladder
Slide 9
Slide 10
Results Ensuring that the wild salmon continues to exist is
more important than reaching a certain stock (WTP did not vary much
between the different groups) The study captures existence values
and non-use values (since most respondents seldom or never visits
the Vindeln river). Northern Sweden (Kronor) Version WTP
questionWTP L Mean WTPWTP R 1345073 2374977 3193542 4334486 5355296
Mean 1-5315174 Southern Sweden (Kronor) Version WTP questionWTP L
Mean WTPWTP R 15257109 2264554 3273383 4243262 5232551 Mean
1-5304373
Slide 11
Costs To increase the number of salmon that reach the spawning
grounds every year from 3000 to 4000 about 50-100 m 3 water per
second would have to be diverted from electricity production.
During the salmon spawning season about 569 m 3 of water per second
pass through the turbines and about430 m 3 during the year on
average. The reduction in electricity production caused by
diverting more water to the old river bed from May 15 to October 1.
About 4,5% of the annual production Uncertainties: Number of years
water is redirected Cost per kWh Discount rate
Slide 12
Total results Total benefits: 96 517 million kronor Total
costs: 114 2101 million kronor Net: -2005 403 million kronor
Slide 13
Conclusions A project to increase the number of salmon
migrating to the spawning grounds in the Vindeln river from 3000 to
4000 per year would be socially profitable if the benefits exceeded
the costs. The willingness-to-pay consists largely of non-use
values and would have been smaller if only use values had been
estimated. Large uncertainty concerning the cost side compared with
the benefit side.