To invest or not to invest
Insights in your green innovation
Would you like to gain insight into the societal effects or your green innovation? Or find out more about the financial feasibility of this ambition? Or both? Using a societal cost-benefit analysis (CBA), we estimate the economic advantages and disadvantages of your project. Based on this, as a project owner, externally involved investor or government, you can decide if a project will achieve the desired social effect and whether this justifies the investment. A social cost-benefit analysis can also be used to determine which project or project variant should be given priority.
Why use a cost-benefit analysis?
The societal cost-benefit analysis (CBA) is conducted from the point of view of society as a whole, including the total costs and benefits from the perspective of all stakeholders that have positive or negative benefits from the investment decision. Within a societal cost-benefit analysis, we consider two different perspectives:
- A financial cost-benefit analysis, in which costs and benefits of the project owner play a central role;
- An economic cost-benefit analysis, in which we also include all societal costs and benefits. Examples are GHG emissions, air pollution, and effects on other markets.
In this respect, the Cost Benefit Analysis differs from financial analyses where only financial costs and benefits that accrue to the owner of the project, as a result of the investment decision, are considered.
Benefits of a Cost Benefit analysis
A Cost Benefit Analysis can help project promoters by:
Providing useful information to decision-makers at key decision milestones throughout the project development cycle;
Prioritising or ranking projects to meet a set of intended objectives with constrained resources;
Scoping out and shortlisting both strategic and technical options in the early programming and project development phase;
Increase transparency and accountability in project selection by using a consistent method that allows assumptions to be tested and impacts to be made transparent.
A societal cost-benefit analysis:
Provides insights in financial feasibility, social impact and cost efficiency of ambitions (including sensitivity analysis);
Serves as a decision-making tool for project owners, external investors or governments through presentation of the project’s Net Present Value;
Allows to compare financial and economic advantages and disadvantages of different projects per stakeholder. Societal costs and benefits are included.
Is aligned with the CBA guidelines provided by the European Commission (EC DG REGIO methodology).
You will be provided with:
True price/shadow price of your product, production process or service. Focus on societal costs and benefits of a project is increasing. Only a high level of technological innovation is not sufficient anymore to have a prestigious project.
An overview of the stakeholders that are benefitting and burdened mostly by execution of the project.
Support for internal decision making and for stimulating the most impactful projects (with identified financial risks).
The financial feasibility of the project and expected payback time.
How do you analyse the (dis)advantages?
1. Description of the context
We describe the social, economic, political and institutional context in which the project will be implemented.
A clear definition of the project objectives in necessary to identify the effects of the project and to verify the project’s relevance.
3. Identification of the project
A project is clearly identified for the societal cost-benefit analysis when:
- The physical elements and the activities that will be implemented to provide a given good or service, and to achieve a well-defined set of objectives, consist of a self-sufficient unit of analysis;
- The body responsible for implementation is identified and its technical, financial, and institutional capacities analysed; and
- The impact area, the final beneficiaries and all relevant stakeholders are duly identified.
The fourth step is about the justification of the project solution and includes: a demand analysis, options analysis, environment and climate change considerations, technical designs, cost estimates and an implementation schedule.
In this step we calculate the project’s financial performance indicators in order to:
- Assess the consolidated project profitability;
- Assess the project profitability for the project owner and some key stakeholders;
- Verify the project financial sustainability, a key feasibility condition for any typology of project;
- Outline the cash flows which underpin the calculation of the socio-economic costs and benefits.
The economic analysis is about appraisal of the project’s contribution to welfare. The key concept is the use of shadow prices to reflect the social opportunity costs of goods and services. This results in the calculation of economic performance indicators: Economic Net Present Value (ENPV), Economic Rate of Return (ERR) and benefit/cost ratio (B/C ratio).
The final step is about performing a risk assessment in order to deal with the uncertainty that always permeates investment projects. Part of this risk assessment is a sensitivity analysis to identify the ‘critical’ variables of the project.
Using specialist knowledge
Outsourcing cost-benefit analysis
EGEN has extensive experience in conducting cost-benefit analyses, both as a tool for decision-making as well as for substantiating the impact of a project required or obtaining (European) subsidies (CEF Transport, CEF AFIF).
EGEN combines specialist knowledge (in the field of environment, energy and sustainable mobility) with knowledge of the European subsidy framework, resulting in impact assessment tools that are in line with the requirements of the European Commission.
Our experts work on a wide range of projects in the sectors energy, environment and mobility, on regional, national and European level. In addition, EGEN has a lot of experience with the execution of a cost-benefit analysis on a wide range of topics, including mobility and waste processing. The CBA’s we have executed for several Horizon 2020 projects are also publicly available.
Meet our specialists
Projects which benefitted from a CBA
EGEN helps companies and organizations which are actively committed to a better climate and environment. In the past years, we have contributed to many projects and e.g. supported them through a cost-benefit analysis.
A project which develops solutions for the management of drinking and waste water in Tunisia, Morocco and Egypt. We have researched which technologies are most profitable to achieve a good system.
In this Horizon 2020 funded project EGEN has mapped best practices within waste waste processing in Europe. EGEN has executed CBAs to analyse all costs and benefits of certain waste systems.
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