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On lessons from energy and environmental cost–benefit analysis

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  • Johansson, Per-Olov

Abstract

This short paper introduces a few concepts from environmental, energy, and health economics that may be useful in evaluations of infrastructure investment in R&D. These concepts focus on valuing commodities and resource stocks under uncertainty. In particular, households may value a commodity (or a resource stock or a species) even if they never will consume the commodity. This may also be true for services generated by R&D infrastructure. Similarly, there are existence values, i.e., a household may be willing to pay for the saving of an endangered species. This may also be true for some R&D infrastructure, i.e., they may be classified as a (world) heritage. They also generate new medical treatments saving lives as well as curing non-fatal diseases. Health and environmental economists have since long dealt with the valuation of such benefits.

Suggested Citation

  • Johansson, Per-Olov, 2016. "On lessons from energy and environmental cost–benefit analysis," Technological Forecasting and Social Change, Elsevier, vol. 112(C), pages 20-25.
    • Handle: RePEc:eee:tefoso:v:112:y:2016:i:c:p:20-25
    DOI: 10.1016/j.techfore.2016.01.002
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    References listed on IDEAS

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    1. Johansson,Per-Olov & Kriström,Bengt, 2015. "Cost-Benefit Analysis for Project Appraisal," Cambridge Books, Cambridge University Press, number 9781107121027, September.
    2. Rosen, Sherwin, 1988. "The Value of Changes in Life Expectancy," Journal of Risk and Uncertainty, Springer, vol. 1(3), pages 285-304, September.
    3. Kenneth J. Arrow & Anthony C. Fisher, 1974. "Environmental Preservation, Uncertainty, and Irreversibility," Palgrave Macmillan Books, in: Chennat Gopalakrishnan (ed.), Classic Papers in Natural Resource Economics, chapter 4, pages 76-84, Palgrave Macmillan.
    4. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    5. Johansson,Per-Olov & Kriström,Bengt, 2015. "Cost-Benefit Analysis for Project Appraisal," Cambridge Books, Cambridge University Press, number 9781107548220, September.
    6. Mensink, Paul & Requate, Till, 2005. "The Dixit-Pindyck and the Arrow-Fisher-Hanemann-Henry option values are not equivalent: a note on Fisher (2000)," Resource and Energy Economics, Elsevier, vol. 27(1), pages 83-88, January.
    7. Graham, Daniel A, 1981. "Cost-Benefit Analysis under Uncertainty," American Economic Review, American Economic Association, vol. 71(4), pages 715-725, September.
    8. Fernandez, Pablo, 2002. "Valuation Methods and Shareholder Value Creation," Elsevier Monographs, Elsevier, edition 1, number 9780122538414.
    9. Burton A. Weisbrod, 1964. "Collective-Consumption Services of Individual-Consumption Goods," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 78(3), pages 471-477.
    10. Arnd Huchzermeier & Christoph H. Loch, 2001. "Project Management Under Risk: Using the Real Options Approach to Evaluate Flexibility in R...D," Management Science, INFORMS, vol. 47(1), pages 85-101, January.
    11. Fisher, Anthony C. & Hanemann, W. Michael, 1987. "Quasi-option value: Some misconceptions dispelled," Journal of Environmental Economics and Management, Elsevier, vol. 14(2), pages 183-190, June.
    12. Claude Henry, 1974. "Investment decisions under uncertainty: The "irreversibility effect"," ULB Institutional Repository 2013/327343, ULB -- Universite Libre de Bruxelles.
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    14. Johansson,Per-Olov, 1993. "Cost-Benefit Analysis of Environmental Change," Cambridge Books, Cambridge University Press, number 9780521447928, September.
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    Cited by:

    1. Hervani, Aref Agahei & Sarkis, Joseph & Helms, Marilyn M., 2017. "Environmental goods valuations for social sustainability: A conceptual framework," Technological Forecasting and Social Change, Elsevier, vol. 125(C), pages 137-153.
    2. José Ángel Gimeno & Eva Llera & Sabina Scarpellini, 2018. "Investment Determinants in Self-Consumption Facilities: Characterization and Qualitative Analysis in Spain," Energies, MDPI, vol. 11(8), pages 1-24, August.
    3. Paolo Sospiro & Leonardo Nibbi & Marco Ciro Liscio & Maurizio De Lucia, 2021. "Cost–Benefit Analysis of Pumped Hydroelectricity Storage Investment in China," Energies, MDPI, vol. 14(24), pages 1-20, December.

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    More about this item

    Keywords

    Cost–benefit analysis; Option value; Option price; Compensating variation; Expected compensating variation; Health; R&D;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • O49 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Other

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