Adani Mine Case Study

Question 1

A social-economic cost-benefit analysis is a framework that is used for evaluating projects and decisions by contrasting the social benefits after project with the cost (Snell, 2009). Societal benefits of a project may include economic development, increase in the standard of living, fewer casualties, generation of electricity at lower rates, or access to cleaner water. This tool is specifically useful for projects that have environmental, social and economic repercussions. The objective of this assessment is to evaluate the report presented by Fahrer (2015) in line with the socioeconomic CBA framework. This examination will focus on highlighting the elements which the report fails to discuss in addition to presenting a qualitative assessment of the methods and techniques used in relation to the Adani Mine case study. The report also showcases a qualitative assessment of the project’s social impact.

Quantification of the Proposed Project’s Environmental, Economic, and Social Impacts

The report presented by Fahrer (2015) includes an environmental impact statement of the project. This statement highlights the process which was undertaken to prepare the report and has details of the milestones which have been reached thus far and the approvals that are outstanding. However, the statement provides qualitative information which is delivered on a periodic basis rather than presenting a quantified summary of the environmental impact. The statement itself is divided into the project-wide chapters, mine chapters and rail chapters. It is important to note that it does not include the environmental analysis of the port. The environmental impacts rendered on each project are categorized in accordance with their specific environmental impact. For example, the mine report includes the environmental impact of the project on the land, air quality, water, transport, and waste in addition to other relevant aspects (Fahrer, 2015).

The second part of the report focuses on discussing the representation of the economic impacts of the project. These impacts have been identified through the utilization of the Computable General Equilibrium (CGE) modelling tool. This model is a comprehensive economic model which makes use of real economic data to provide approximations of how an economy might respond to changes in external factors such as policies or technology. This model consists of two important components the first of these components intends to demonstrate the structure of an economy while the second component highlights the responses and behaviors of households, firms and the government. The model provides approximations for two parts which an economy can take in the future one of these thoughts exist with the project while the other is without the project. The report of Farrer presents the results of these models through quantified outputs which includes statistics on income employment output and other variables.

The social impact of the project is reflected as the larger output of the cost-benefit analysis whereby the social costs associated with the project are in the amalgamation of public expenditures, private costs as well as externality costs (Fahrer, 2015). The social impact of the project on local communities as well as cultural implications is not highlighted through a separate model which is one of the limitations of the assessment showcased in the report.

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Qualitative Assessment of Estimates and Quantifications Conducted

The report suggests that the benefits of the project which exclude the component of consumer surplus are that of the revenues generated through coal sales. However, this is a narrow perspective of the project benefits as it is solely economic and does not consider the benefit secured in terms of employment. While the project cost estimation has been presented the primary issue in the representation is the lack of theoretical basis and clarity in defining these costs and their corresponding link with the environmental, economic, and social impacts of the project. This indicates that these quantifications are limited in their scope and primarily focus on the economic benefit of the project while discrediting the larger social issues at play.

Qualitative Assessment of Biases in Estimates and Quantifications

According to Eccleston (2011), community participation and involvement in the execution of approval processes for certain projects may distort the conclusions of a report. Public pressure may also influence reporting mechanisms and manipulate the transparency of procedures which may ultimately reflect in the socio-economic cost-benefit analysis. A recurring bias in the socio-economic cost-benefit analysis is that the quantification and correlative assessment of certain environmental impacts which may occur during the long run are difficult to establish. Therefore, these long-term impacts may be shown within the cost-benefit analysis by taking into consideration and individuals’ perceptions about how those consequences may emerge (Schwartz, 2017). For example in the report of Fahrer (2015), projects such as the Alpha Coal Project and the South Galilee Coal Project have been taken as reference points however, these projects are also based on their set of assumptions and diocese after authors which may then reflect into the report.

Qualitative Assessment of Choice of Methods, Assumptions, and Techniques

For the purpose of establishing the environmental impact of the project, the report presented by Fahrer (2015) utilized an environmental impact statement for presenting relevant findings and critical information about the project. The environmental impact assessment is a comprehensive framework that is adopted for measuring the probable environmental impacts of a project by considering the interconnected cultural, human-health and socio-economic consequences (Eccleston, 2011). The most important advantage of this mechanism is that it is a consolidated process, which gathers the synergistic strengths of a collaborative plan that evaluates identifies, and implements the sustainable measures for a proposed project. Environmental impact assessment enables better proposal design and ensures adherence to environmental standards. A well-designed environmental impact assessment can also promote reductions in operating and capital costs by reducing the burden of undue expenses. and my mental issues which are not highlighted at the beginning of the proposal design require modification at later stages which can considerably increase project costs. An environmental impact assessment addresses this concern by anticipating the problems in advance so that they can be avoided. In the report of Fahrer (2015), the environmental impact statement implies that it is deficient for the purposes of decision making. An appropriate technique in this case would have been to release a quantified environmental impact statement on a periodic basis which would have enabled decision-makers to understand the monetary impact of their decisions as the project continued to advance.

The economic impact of the project was presented through the Computable General Equilibrium (CGE) modelling tool. The advantage of utilizing the stool for understanding the economic impact of the project is that it takes into consideration the interactions between industries and sectors the impact of price changes and the availability of resources within the economy (Fahrer, 2015). In comparison with other models, this framework considers the behavior of the production and consumption functions and their subsequent reactions because of changes in the market. The Fahrer (2015) report simplified assumptions so that the models could be more practical during the analysis component. The assumptions employed for the purposes of this report were realistic within the context of the Australian labor market and noted that the project will not lead to a decline in cyclical employment over the course of its life.

The social impact of the project is defined as one of the wider outcomes of the cost benefit analysis which indicates that a specific model was not applied to showcase social costs and benefits separately as was the case with the environmental and economic assessment conducted for this project. a comprehensive and widely used tool to gauge social impact of a large-scale project is that of a social impact assessment. Components of this framework include analyzing the human rights angle of the project, concerns related to supply chain management and compliance with social performance standards with reference to a project. The objective of this tool is to assess how a project can impact the core elements of justice, resilience, sustainability, culture, community and gender through its implementation (Esteves, Franks and Vanclay, 2012).

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Question 2

A socio-economic cost-benefit analysis is different from a traditional cost-benefit analysis because it not only takes into account the economic implications of a project but also considers environmental aspects and societal benefits before evaluating whether a project should be executed. The societal advantages of a project may include access to cleaner water and sanitation, improvement in the standard of living, fewer fatalities, improvement in culture, reduction in gender disparity and widespread justice. The social-economic cost-benefit analysis quantifies these aspects based on public preferences and their willingness to pay for the marginal rise in risk (Molinos-Senante, Hernández-Sancho and Sala-Garrido, 2010).

The fundamental issue with the socioeconomic cost and benefit analysis conducted for this project is that it does not present a comprehensive quantification of the social costs and benefits using appropriate tools, methods, techniques and assumptions. Large-scale project such as this have a direct impact on the livelihood of the community including their health. Therefore, the first recommendation for improving the quality of the analysis is to classify the social costs and benefits of the project by transitioning beyond economic and environmental costs. Once these costs have been classified the next step is to quantify them by gauging public opinion, preferences, and their willingness to pay for the instrumental risks linked with these costs.

An example of the quantification of these social costs is depicted in a report presented for the world Bank titled The Social Cost of Coal by Grausz (2011). The report indicates that the adverse health-related impact of coal-powered electricity mean that employable members of the population may have to move away from the workflows and education. Cool power generation also distorts the quality of water and creates water pollution which further contributes to health issues while reducing the quality of agriculture increasing the cost of living and impacting the competitiveness of agricultural produce on an international scale (Grausz, 2011).

It is important to note that while a considerable proportion of the costs linked with a large-scale coal project are environmental their subsequent impact is societal because storms and floods caused by climate pollution carry significant a social burden. Based on this understanding, a reassessment of the report analysis would call for the quantification of these social costs which emerge from the environmental component. The two main categories of costs, in this case, are defined as explicit costs which are paid for by the owner of the project while the external costs are those that are borne by society (Grausz, 2011). The primary external costs which will be included in the revised socio-economic cost-benefit analysis for this project would include the adverse health consequences from carbon dioxide emission, water pollution and the adverse impact of greenhouse emissions. As noted by Grausz (2011), a comprehensive socio-economic cost-benefit analysis should consider these external costs as they emerge during the project lifecycle and not merely at the beginning of the project which is the stage at which coal mining takes place. Once the coal has been extracted the subsequent phases include transportation, generation of electricity and waste management through the disposal of by-products such as coal ash. Another element to include in the review would be that of the risk and uncertainty based on the probability of environmental and societal damage (Abelson, 2015).

As noted by Samadi (2017), an appropriate and socially responsible approach in the case of evaluating large-scale projects is to include external costs and not only plant-level costs when conducting their review. In the revised socio-economic cost benefit analysis for the project, the impacts would be quantified in accordance with the project lifecycle to help develop mitigation strategies that are relevant for a specific phase. The second level of quantification will take place by considering the different stakeholders who are associated with the cost. For example, the supply chain management company that is responsible for the transportation and logistics of coal should be involved while considering the hazards that are associated with the transportation of coal. This will help establish strategies for reducing the societal cost which is incurred during the specific phase of the project. Therefore, the new component which will be introduced in the re-analysis of the social economic cost benefit framework will consider the social costs that are linked with electricity generation.

References

Abelson, P. (2015). Cost–Benefit Evaluation of Mining Projects. Australian economic review, 48(4), 442-452.

Eccleston, C. H. (2011). Environmental impact assessment: A guide to best professional practices. Crc Press.

Esteves, A. M., Franks, D., & Vanclay, F. (2012). Social impact assessment: the state of the art. Impact Assessment and Project Appraisal, 30(1), 34-42.

Fahrer, J. (2015). Carmichael coal and rail project: Economic assessment–Expert report by Jerome Fahrer. ACIL Allen consulting, report to Land Court of Queensland.

Grausz, S. (2011). The social cost of coal: implications for the World Bank. Washington, DC: Climate Advisors.

Molinos-Senante, M., Hernández-Sancho, F., & Sala-Garrido, R. (2010). Economic feasibility study for wastewater treatment: A cost–benefit analysis. Science of the Total Environment, 408(20), 4396-4402.

Samadi, S. (2017). The social costs of electricity generation—Categorising different types of costs and evaluating their respective relevance. Energies, 10(3), 356.

Schwartz, M. S. (2017). Business ethics: An ethical decision-making approach. John Wiley & Sons.

Snell, M. (2009). Cost-benefit analysis: a practical guide, second edition. Thomas Telford.

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