benefit analysis of waterreuse projects.docx

1、benefit analysis of waterreuse projectsCostbenefit analysis of water-reuse projects for environmental purposes: A case study for Spanish wastewater treatment plantsM. Molinos-Senantea, , , F. Hernndez-Sanchoa, 1, , R. Sala-Garridob, 2, aDepartment of Applied Economics II, Universitat de Valencia, Ca

2、mpus dels Tarongers, 46022 Valencia, SpainbDepartment of Mathematics for Economics, Universitat de Valencia, Campus dels Tarongers, 46022 Valencia, SpainReceived 1 December 2010; revised 5 July 2011; Accepted 22 July 2011. Available online 18 August 2011.AbstractWater reuse is an emerging and promis

3、ing non-conventional water resource. Feasibility studies are essential tools in the decision making process for the implementation of water-reuse projects. However, the methods used to assess economic feasibility tend to focus on internal costs, while external impacts are relegated to unsubstantiate

4、d statements about the advantages of water reuse. Using the concept of shadow prices for undesirable outputs of water reclamation, the current study developed a theoretical methodology to assess internal and external economic impacts. The proposed methodological approach is applied to 13 wastewater

5、treatment plants in the Valencia region of Spain that reuse effluent for environmental purposes. Internal benefit analyses indicated that only a proportion of projects were economically viable, while when external benefits are incorporated all projects were economically viable. In conclusion, the ec

6、onomic feasibility assessments of water-reuse projects should quantitatively evaluate economic, environmental and resource availability.Highlights the shadow price methodology is a pioneering approach to quantify the environmental benefit associated with avoiding the discharge of pollutants. This ap

7、proach is based on the directional distance functions and represents an alternative to conventional methods of economic valuation. The methodology proposed in this paper allows the assessment of external economic impacts of water-reuse projects. The economic valuation of externalities is a very rele

8、vant issue in order to carry out realistic feasibility studies of water-reuse projects.Keywords: Directional distance function; Costbenefit analysis; Economic feasibility; Environmental benefit; Shadow prices; Wastewater reuseArticle Outline 1. Introduction 2. Methodology for assessing the feasibili

9、ty of water-reuse projects o 2.1. Backgroundo 2.2. Internal benefito 2.3. External benefito 2.4. Opportunity cost 3. Case study: water-reuse projects in the Valencia Region 4. Results and discussion o 4.1. Internal benefito 4.2. External benefito 4.3. Total benefit 5. Conclusions Acknowledgments Ref

10、erences1. IntroductionEurope has witnessed growing levels of water stress, both in terms of scarcity and the deterioration of quality. This situation has prompted many municipalities to identify more efficient uses of water resources, including more widespread acceptance of the use of non-convention

11、al water sources (Bixio et al., 2006). In this sense, water reuse has emerged as the most viable alternative since it performs two key functions: (i) increasing water supply and (ii) reducing pollution by discharging less wastewater into the environment (Hochstrat et al., 2007). These are the reason

12、s for recognition of the growing importance of water reuse in areas that are subject to harsh conditions with respect to water stress or seasonal water demand ( Salgot, 2008 and Miller, 2006 ).Feasibility studies are essential tools in the decision making process for the implementation of wastewater

13、-reuse projects (AQUAREC, 2006). The methods that are commonly applied in this area typically show significant bias toward the strictly technical field. Fortunately, in recent decades there has been rapidly increasing acknowledgment in the need to implement “sustainability” in wastewater management

14、(Lim et al., 2008). According to the concept of sustainable development, a water-reuse project must comply with environmental, socio-cultural and economic needs to be deemed sustainable (Balkema et al., 2002).Economic considerations are therefore of high importance when assessing the potential of wa

15、ter-reuse projects ( Asano, 1998 and Asano, 2007 ). Furthermore, the Water Framework Directive (WFD) assigns significance to economic analysis to achieve suitable water resource management. However, economic feasibility of research on wastewater regeneration and reuse remains the least studied compo

16、nent. In part, this is because internal and external economic impacts of environmental based projects should be identified and quantified when analyzing economic feasibility, such as for water reuse (Molinos-Senante et al., 2010). While internal impacts may be easily translated into monetary units,

17、external effects (or externalities) are not considered by the market, thus requiring economic valuation methods for their quantification. As a result, a series of statements about the advantages of wastewater regeneration and reuse are often presented, without supporting economic quantification. Con

18、sequently, the true benefits and costs of many projects are not properly evaluated (Segu, 2004).Nevertheless, there is growing interest in the monetary valuation of these externalities. For example, the costbenefit analysis (CBA) of Godfrey et al. (2009) with respect to a system of greywater reuse i

19、n India. The monetary values of external benefits and costs, in terms of the environment and health, were derived by using scientific references ( North and Griffin, 1993 , Hanley and Spash, 1993 , Field, 1997 , Curry and Weiss, 1993 and Hutton and Haller, 2004 ). The authors used conventional econo

20、mic methods, such as hedonic valuation and contingent valuation. In comparison, Segu et al. (2009) used travel costs to determine the environmental benefits arising from wastewater reuse for a wetland restoration project. Furthermore, Chen and Wang (2009) proposed a net benefit value model for costb

21、enefit evaluation of water-reuse projects in a residential area of China. The benefits relating to the environment were calculated by applying a mathematical equation developed by the Chinese Ministry of Environmental Protection.The concept of directional distance function has been suggested ( Fre e

22、t al., 1993 , Fre et al., 2001 and Fre et al., 2006 ) as an alternative to conventional methods of economic valuation (stated preference methods). This concept aims to calculate shadow price value of undesirable outputs arising from productive activities that have no market value. This method is der

23、ived from a “costs production perspective”, which contrasts to the usual methods that are linked to a “demand perspective” (Diaz-Balteiro and Romero, 2008).The advantages of the directional distance approach include the following: (i) shadow prices may be used to determine how much income would be g

24、ained if some of the resources were privatized; (ii) authorities may use the information provided by shadow prices to set rates for using environmental services, or to compare current rates with the marginal revenue generated (Fre et al., 2001); (iii) this methodology may help society understand the

25、 benefits generated as a result of environmental improvement programs; and (iv) shadow price models may offer economists further insights into estimated measures of willingness to pay produced by alternative models such as the contingent valuation method, or capitalization methods (Fre et al., 2001)

26、. Furthermore, shadow price quantification is relatively inexpensive when compared to surveying processes.With the aim to integrate economic and environmental aspects in the design and implementation of wastewater-reuse projects, the current study presents a method to assess the economic feasibility

27、 of water-reuse projects taking both internal and external impacts into consideration. This was achieved by using the concept of shadow prices of undesirable outputs arising from the water regeneration process. The proposed methodological approach is subsequently used to assess the economic feasibil

28、ity of various wastewater-reuse projects for environmental purposes in the Valencia region on the Mediterranean coast of Spain.2. Methodology for assessing the feasibility of water-reuse projects2.1. BackgroundEconomic feasibility studies of wastewater-reuse projects should be completed by using con

29、ventional methodologies of economic analysis, such as costbenefit analysis (CBA) (van der Bruggen et al., 2009). According to Segu (2004) and Hernndez et al. (2006), total benefit is calculated by considering internal benefit, external benefit, and opportunity cost, as shown in Equation (1).(1)BT=BI

30、+BEOCwhere BT is the total benefit (total income minus total costs); BI is the internal benefit (internal income minus internal costs); BE is the external benefit (positive externalities minus negative externalities); and OC is the opportunity cost. CBA originates from the premise that a project is

31、only economically feasible if all incomes exceed the aggregate costs. In other words, according to Equation (1) if the BT 0, whereby the best option offers the highest total benefit.2.2. Internal benefitInternal impacts are directly linked with the process of wastewater regeneration, and subsequent

32、reuse. The internal benefit represents the difference between internal income and internal costs. Internal income includes revenues from the sale of regenerated water and other recovered sub-products. If reclaimed water is used in agriculture, the nitrogen and phosphorus contents in water offer a saving in fertilizer costs. Alternatively, if reclaimed water is intended for environmental purposes, these nutrients may be recovered during wastewater treatment and subsequently sold for other uses. Internal costs are the result of the sum of inves