IDEAS home Printed from https://ideas.repec.org/a/eee/rensus/v59y2016icp1419-1425.html
   My bibliography  Save this article

Cost-benefit analysis of an infrastructure project and a cost-reflective tariff: A case study for investment in wastewater treatment plant in Serbia

Author

Listed:
  • Djukic, Malisa
  • Jovanoski, Iljcho
  • Ivanovic, Olja Munitlak
  • Lazic, Milena
  • Bodroza, Dusko

Abstract

To prevent the environment from being adversely affected by the disposal of insufficiently-treated wastewater, the European Urban Wastewater Directive (Directives 91/271/EEC and 98/15/EEC) emphasizes the need for secondary or more stringent treatment of urban wastewater in sensitive areas. The EU Water Framework Directive (Directive 2000/60/EC) stresses the role of economic analysis to prevent the degradation and depletion of water resources. The wastewater treatment process results in external benefits that should be quantified in order to assess the economic feasibility of a proposed project. The principle of full cost recovery and “the polluter pays” principle are to be pursued. Using the European Commission methodology for cost-benefit analysis, economic performance indicators of an infrastructure project in Serbia requiring tertiary treatment of wastewater in a sensitive area are calculated. To ensure a financial sustainability, the authors assessed a cost-reflective tariff to be introduced following the start of wastewater treatment plant operations. The economic net present value is positive, while the economic internal rate of return is greater than the social discount rate. Full cost recovery implies a significant tariff increase that should be taken into account by water authorities and companies as the project should not be only economically feasible, but also socially affordable.

Suggested Citation

  • Djukic, Malisa & Jovanoski, Iljcho & Ivanovic, Olja Munitlak & Lazic, Milena & Bodroza, Dusko, 2016. "Cost-benefit analysis of an infrastructure project and a cost-reflective tariff: A case study for investment in wastewater treatment plant in Serbia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 59(C), pages 1419-1425.
    • Handle: RePEc:eee:rensus:v:59:y:2016:i:c:p:1419-1425
    DOI: 10.1016/j.rser.2016.01.050
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1364032116000800
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.rser.2016.01.050?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ekin Birol & Katia Karousakis & Phoebe Koundouri, 2006. "Using economic valuation techniques to inform water resources management: A survey and critical appraisal of available techniques and an application," DEOS Working Papers 0607, Athens University of Economics and Business.
    2. Gayer, Ted & Horowitz, John K., 2006. "Market-based Approaches to Environmental Regulation," Foundations and Trends(R) in Microeconomics, now publishers, vol. 1(4), pages 201-326, August.
    3. Vieira, Abel S. & Beal, Cara D. & Ghisi, Enedir & Stewart, Rodney A., 2014. "Energy intensity of rainwater harvesting systems: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 34(C), pages 225-242.
    4. Boyle Kevin J. & Desvousges William H. & Johnson F. Reed & Dunford Richard W. & Hudson Sara P., 1994. "An Investigation of Part-Whole Biases in Contingent-Valuation Studies," Journal of Environmental Economics and Management, Elsevier, vol. 27(1), pages 64-83, July.
    5. Sobrino, Fernando Hernández & Monroy, Carlos Rodríguez, 2009. "Critical analysis of the European Union directive which regulates the use of biofuels: An approach to the Spanish case," Renewable and Sustainable Energy Reviews, Elsevier, vol. 13(9), pages 2675-2681, December.
    6. Nyborg, Karine, 2014. "Project evaluation with democratic decision-making: What does cost–benefit analysis really measure?," Ecological Economics, Elsevier, vol. 106(C), pages 124-131.
    7. Fessehaye, Mussie & Abdul-Wahab, Sabah A. & Savage, Michael J. & Kohler, Thomas & Gherezghiher, Tseggai & Hurni, Hans, 2014. "Fog-water collection for community use," Renewable and Sustainable Energy Reviews, Elsevier, vol. 29(C), pages 52-62.
    8. Peter A. Diamond & Jerry A. Hausman, 1994. "Contingent Valuation: Is Some Number Better than No Number?," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 45-64, Fall.
    9. Colmenar-Santos, Antonio & Borge-Diez, David & Molina, Clara Pérez & Castro-Gil, Manuel, 2014. "Water consumption in solar parabolic trough plants: review and analysis of the southern Spain case," Renewable and Sustainable Energy Reviews, Elsevier, vol. 34(C), pages 565-577.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. A. Bellver-Domingo & F. Hernández-Sancho, 2018. "Environmental Benefit of Improving Wastewater Quality: A Shadow Prices Approach for Sensitive Areas," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 4(02), pages 1-15, April.
    2. Shengqin Zheng & Ke Xu & Qing He & Shaoze Fang & Lin Zhang, 2018. "Investigating the Sustainability Performance of PPP-Type Infrastructure Projects: A Case of China," Sustainability, MDPI, vol. 10(11), pages 1-15, November.
    3. Liping Cao & Fenqi Zhou & Yuan Zhu, 2021. "Performance-Influencing Factors and Improvement Paths of Third-Party Governance Service Regarding Environmental Pollution—An Empirical Study of the SEM Based on Shanghai Data," Sustainability, MDPI, vol. 13(4), pages 1-24, February.
    4. Carme Machí Castañer & Águeda Bellver-Domingo & Francesc Hernández-Sancho, 2020. "Environmental and Economic Approach to Assess a Horizontal Sub-Surface Flow Wetland in Developing Area," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 34(12), pages 3761-3778, September.
    5. Márta Somogyvári, 2018. "Ethical Aspects of Intertemporal Discounting and the Social Discount Rate," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 17(3), pages 109-132.
    6. Ruiz-Rosa, Inés & García-Rodríguez, Francisco J. & Antonova, Natalia, 2020. "Developing a methodology to recover the cost of wastewater reuse: A proposal based on the polluter pays principle," Utilities Policy, Elsevier, vol. 65(C).
    7. Leticia Gallego-Valero & Encarnación Moral-Parajes & Isabel María Román-Sánchez, 2021. "Wastewater Treatment Costs: A Research Overview through Bibliometric Analysis," Sustainability, MDPI, vol. 13(9), pages 1-14, April.
    8. Ambika Markanday & Ibon Galarraga & Anil Markandya, 2019. "A Critical Review Of Cost-Benefit Analysis For Climate Change Adaptation In Cities," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 10(04), pages 1-31, November.
    9. Nikolic, Ana & Mikic, Miljan & Naunovic, Zorana, 2017. "Broadening the urban sustainable energy diapason through energy recovery from waste: A feasibility study for the capital of Serbia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 69(C), pages 1-8.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. John C. Whitehead & Timothy C. Haab & Ju‐Chin Huang, 1998. "Part‐Whole Bias in Contingent Valuation: Will Scope Effects Be Detected with Inexpensive Survey Methods?," Southern Economic Journal, John Wiley & Sons, vol. 65(1), pages 160-168, July.
    2. Powe, N. A. & Bateman, I. J., 2003. "Ordering effects in nested 'top-down' and 'bottom-up' contingent valuation designs," Ecological Economics, Elsevier, vol. 45(2), pages 255-270, June.
    3. Diane Dupont, 2003. "CVM Embedding Effects When There Are Active, Potentially Active and Passive Users of Environmental Goods," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 25(3), pages 319-341, July.
    4. Carson, Richard T. & Hanemann, W. Michael & Kopp, Raymond J. & Krosnick, Jon A. & Mitchell, Robert C. & Presser, Stanley & Ruud, Paul A. & Smith, V. Kerry & Conaway, Michael & Martin, Kerry, 1996. "Was the NOAA Panel Correct about Contingent Valuation?," Discussion Papers 10503, Resources for the Future.
    5. Clark, Judy & Burgess, Jacquelin & Harrison, Carolyn M., 2000. ""I struggled with this money business": respondents' perspectives on contingent valuation," Ecological Economics, Elsevier, vol. 33(1), pages 45-62, April.
    6. Ana Faria Lopes & Gorm Kipperberg, 2020. "Diagnosing Insensitivity to Scope in Contingent Valuation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 77(1), pages 191-216, September.
    7. Rollins, Kimberly & Lyke, Audrey, 1998. "The Case for Diminishing Marginal Existence Values," Journal of Environmental Economics and Management, Elsevier, vol. 36(3), pages 324-344, November.
    8. Ressurreição, Adriana & Gibbons, James & Dentinho, Tomaz Ponce & Kaiser, Michel & Santos, Ricardo S. & Edwards-Jones, Gareth, 2011. "Economic valuation of species loss in the open sea," Ecological Economics, Elsevier, vol. 70(4), pages 729-739, February.
    9. Whitehead, John C., 2016. "Plausible responsiveness to scope in contingent valuation," Ecological Economics, Elsevier, vol. 128(C), pages 17-22.
    10. Mandy Ryan, 2004. "A comparison of stated preference methods for estimating monetary values," Health Economics, John Wiley & Sons, Ltd., vol. 13(3), pages 291-296, March.
    11. Schlapfer, Felix, 2008. "Contingent valuation: A new perspective," Ecological Economics, Elsevier, vol. 64(4), pages 729-740, February.
    12. Kumbaroglu, Gürkan & Karali, Nihan & ArIkan, YIldIz, 2008. "CO2, GDP and RET: An aggregate economic equilibrium analysis for Turkey," Energy Policy, Elsevier, vol. 36(7), pages 2694-2708, July.
    13. Mouter, Niek & Cabral, Manuel Ojeda & Dekker, Thijs & van Cranenburgh, Sander, 2019. "The value of travel time, noise pollution, recreation and biodiversity: A social choice valuation perspective," Research in Transportation Economics, Elsevier, vol. 76(C).
    14. Shiell, Alan & Gold, Lisa, 2002. "Contingent valuation in health care and the persistence of embedding effects without the warm glow," Journal of Economic Psychology, Elsevier, vol. 23(2), pages 251-262, April.
    15. Lopez-Becerra, E.I. & Alcon, F., 2021. "Social desirability bias in the environmental economic valuation: An inferred valuation approach," Ecological Economics, Elsevier, vol. 184(C).
    16. Ojea, Elena & Loureiro, Maria L., 2011. "Identifying the scope effect on a meta-analysis of biodiversity valuation studies," Resource and Energy Economics, Elsevier, vol. 33(3), pages 706-724, September.
    17. Georgios Tentes & Dimitrios Damigos, 2012. "The Lost Value of Groundwater: The Case of Asopos River Basin in Central Greece," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 26(1), pages 147-164, January.
    18. Moisés Carrasco Garcés & Felipe Vasquez-Lavin & Roberto D. Ponce Oliva & José Luis Bustamante Oporto & Manuel Barrientos & Arcadio A. Cerda, 2021. "Embedding effect and the consequences of advanced disclosure: evidence from the valuation of cultural goods," Empirical Economics, Springer, vol. 61(2), pages 1039-1062, August.
    19. Ian J. Bateman & Michael P. Cameron & Antreas Tsoumas, 2006. "Investigating the Characteristics of Stated Preferences for Reducing the Impacts of Air Pollution: A Contingent Valuation Experiment," Working Papers in Economics 06/08, University of Waikato.
    20. John Whitehead & Suzanne Finney, 2003. "Willingness to Pay for Submerged Maritime Cultural Resources," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 27(3), pages 231-240, November.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:rensus:v:59:y:2016:i:c:p:1419-1425. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/600126/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.