Integrating environmental impacts into Cost-Benefit Analysis using emergy

Abstract

Evaluating project viability often relies on economic analysis with environmental impacts either evaluated subjectively in a separate analysis or not at all. The concept of the study was to express environmental impacts as cash flow equivalents through the life of the project to directly compare environmental and economic impacts in a standard cost-benefit analysis. Embodied energy accounting methodologies have been used as a novel method for converting environmental impacts of a project to monetary terms. With environmental impacts expressed in monetary terms on an annual basis, the present value of the environmental impacts could be calculated using an appropriate interest rate based on environmentally-focused investment for a similar project. Application of this method to a case study based on a recent wetland restoration project in eastern Canada demonstrated that inclusion of environmental impact valuation in the analysis of the project changes the project from a net-cost (CAN$-23.5 million) to a net-benefit (CAN$3.7 million) and providing a clear justification for the project. This method is applicable to projects with significant environmental impacts and can be used in a project approval process or for selecting between project approaches.