Professional Documents
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MARCO GATTO
1400 - 1800
2008 - 2030
1960 - 1970
1920 - 1940
Direct effects are “those arising from the
construction, use and presence of project
services” (Eijgenraam et al., 2000a). Different
types of stakeholders are directly influenced
by the project:
• Operator. In the first place, a reclamation
1800 - 1900 project involves investors/landowners and
suppliers of the project services. Albeit these
functions can be executed by different
1970 – 2008 agents, for simplicity the term “operator”
1946 - 1960 will be used to represent them all together
as single stakeholder, whose objective is to
Figure 4. Historical developments of the Port of Rotterdam.
Interfaceprojecten maximise the return from the investment
project. From the operator point of view,
FIRST FASE
1: Inleiding MAASVLAKTE
Maasvlakte 2 2 Containers 2
Chemistry the stream of costs is weighed against
Distribution
Empty depot
Leidingenpassage revenues, resulting in the (net) operating
Yangtzehaven
profit.
NUTS voorzieningen • Users. The provision of new/better services is
Verplaatsen steiger / at the core of infrastructure development
plaatsen oliescherm projects. The users of services are normally
MOT
those enjoying the larger benefits from
Knooppunt E
investment projects. By investing in
Aanleg Entreegebied infrastructure, the service supplier (operator)
Maasvlakte 2:
might be able to sell more project services
• Wegenwerk
and/or more efficiently. This will lead to a
North Sea • Knooppunt B
Figure 5. Left, the MV2 Masterplan. welfare improvement, which is typically
• Realisatie Spoor
Figure 6. Below, Aerial view of measured as “Consumer Surplus”. As the
• Afsnuiten
Maasvlakte 2 under construction.
bezinkingsbassin
unit price of a service decreases, for
instance, users benefit by paying relatively
3
less than what they would pay in the base
case. On the other hand, if the producer
continues to sell at the same price, the
producer retains the unit cost reduction and
earns extra-profit (Producer Surplus).
• Third parties. These are agents other than
the operator and the users of the services.
Third parties may be directly influenced by
the construction, use or presence of the
infrastructure even though they are not
involved in the project operations or are not
using the services. Third parties can be
residents, who experience negative project
effects in the form of pollution, noise and/
or positive effects in the form of increased
difficulty of deriving reliable cost-benefit of infrastructure projects of Eijgenraam et al. housing values.
estimates over relatively long periods of time (2000a, 2000b), project effects are
as well as the general difficulty of forecasting distinguished in two broad categories: direct Indirect effects are represented by “the
how a situation develops after a project is effects and indirect effects. Direct effects are consequences of a project that are not directly
implemented. Hence, in step 6 a sensitivity examined by looking at the parties and related to the project, but which instead flow
analysis is usually conducted by examining stakeholders that are directly affected by the from the direct effect” (Eijgenraam et al.,
how the NPV responds to changes in the project, while indirect effects are classified 2000b). Indirect effects are commonly seen
value of key variables or of factors presenting into different typologies. Table I gives an as advantages that spread from the project
high uncertainty. overview of the various categories of effects, service sector through the rest of the
providing compact definitions along with economy by means of market transactions.
Following the framework for the evaluation intuitive examples. It is important to note that indirect welfare
Figure 7. Cash-flow Maasvlakte 2 - Port of Rotterdam (Source: PRA).
changes arise only in particular situations, are needed in the activities directly or project contribution to the welfare of the
e.g., in the presence of market failures indirectly related to it. If there is full region or country.
(Eijgenraam et al., 2000a, 2000b). The employment, the increase in job demand is
impacts generally included in CBA as indirect fulfilled by shifting workers already MAASVLAKTE 2
effects are: employed in other companies or regions The Port of Rotterdam is the largest port in
(redistribution), which means no additional Europe. In 2012, its total throughput reached
• Network effects. These are especially employment is created. On the other hand, 440 million tonnes per annum and a market
relevant for transport infrastructure projects in the case of structural unemployment a share of almost 38% in Northwest Europe
such as port development. Transport positive effect might result from the project. (PRA, 2012). The Port has a very strong
infrastructures are typically part of a broader position both as global hub and industrial
network and represent a part such as a line The analyses of the case studies proposed in cluster and handles very large volumes of
connection between two places or a hub the next section are meant to give insights cargo across all main sectors (containers, dry
that is connected with multiple routes. into the types of effects resulting from bulk, liquid bulk). The Port of Rotterdam
As a transport infrastructure is developed, projects with different purposes, as well as Authority (PRA), a government corporation
the induced traffic (i.e., the extra volume of into the possible outcomes of an economic jointly owned by the Municipality of
goods or passengers using the new evaluation of reclamation projects. Rotterdam and the Dutch State, is the
infrastructure) will flow either downstream manager, operator and developer of
or upstream the network to reach the final CASE STUDIES Rotterdam port and industrial area. Facing
destination, producing consequences on the In order to illustrate how the CBA increasing volumes of cargo, PRA decided to
whole network to which it is connected. methodology can be used to evaluate actual further develop the port complex.
Depending on how the existing network projects, two cases studies are analysed here:
capacity can accommodate the extra one for a port development project and one Along with an intensification of activities in
volume, network effects will be either for a recreation project. These were selected the existing port, a 20% expansion of the
positive or negative: positive, if the extra by considering the main space-related needs port area was considered necessary to fully
volume leads to a better or more efficient in coastal cities which are the most important meet handling capacity demand for the next
utilisation of the existing capacity; negative, drivers of reclamation activities. The analysis 30 years (PRA, 2011). Maasvlakte 2 (MV2) is
if congestion emerges. of the case studies is done on the basis of the the answer PRA designed to implement such
• Strategic and locational effects. Efficiency framework described above. However, the expansion. The project consists of reclamation
improvements generated through new evaluation is structured following two distinct of 2000 ha in front of the existing port. Half
infrastructures help increase the types of analysis: the financial analysis and the of the area is for commercial use, offering
competitiveness of an economic system, socio-economic analysis. allocable sites for three main sectors:
with positive consequences on investment container handling, chemical industry and
inflow and international trade. In some Such analyses evidence different point of distribution.
cases, infrastructure projects generate views which can be taken in project appraisal.
location advantages for businesses, The financial analysis is made on behalf of the The general objectives of the project are: to
contributing to attract new activities and owner/operator of the infrastructure and overcome capacity constraints in the existing
investments from elsewhere. The inflow of therefore uses the cash flow expected from port to confront an expected increase in cargo
new players can have positive consequences the project to calculate the financial return on flows; and to limit the exposure of people to
on the local economic system. the investment. The socio-economic analysis environmental externalities related to port
• Employment. During and after the considers all the effects for all relevant activities. Considering factors such as
implementation of a project, new workers stakeholders in society, so as to determine the economic growth, volume of world trade, oil
30 Terra et Aqua | Number 138 | March 2015
Socio-economic analysis (CBA) Third parties improves the business climate, favouring
Socio-economic analysis takes into The intensification of port activities that takes new investments and attracting new
consideration all effects generated by MV2 place through MV2 also affects parties that companies. In perspective, the attraction/
that are relevant to Dutch society. Given that are not users or suppliers of project services. expansion of a specialized, skilled workforce
the local and national governments have In a national CBA, this category of (sustained also through public investments
strongly supported the project politically, and stakeholders basically refers to local residents in urban development and quality of life)
also in part financially, a national point of or Dutch citizens negatively influenced by can prove strategic for future regional
view is taken for the CBA of MV2. As the activities related to the construction, presence specialization in the maritime and port
users of cargo or chemical products are and use of MV2. The Environmental Impact industry, and hence further economic
located for a large part abroad, this implies Assessment provides the most information on development of Rotterdam and Rijnmond.
disregarding the substantial forward effects of MV2’s external effects. Important to consider • Employment. According to CPB (2001b), the
the project, spreading beyond national are the consequences the project has on: local labour market is characterized by
borders. landscape (view of industrial plants), structural unemployment of low-skilled
recreational services (destruction/creation of workers, which is arguably the result of a
Users beaches and other recreational areas), nature problem in the supply side – companies are
Users of project services are fundamentally (coastal ecosystem services), and environment willing to hire, but low-skilled workers do
companies demanding container handling (air, water, sound, pollution). In total, external not have the required competences. Hence,
services and related logistic operations and effects should be relatively low (CPB, 2001b), the labour demand induced by MV2 could
users of chemical products. In the container partially because of the large distance face the same sort of problem, in which
sector, considerable capacity shortage would separating MV2 from urban and residential case workers from other region will mostly
occur if MV2 were not developed (base case), settlements. be working at MV2 and its spin-off activities
resulting in increasingly congested, inefficient (only redistribution of workers across
and overall costly terminal operations. Hence, Indirect effects regions). Despite the weak impact on
the welfare effect of MV2 on users of As a large-scale infrastructure project, MV2 employment, MV2’s macro-economic
handling services is given by the change in entails considerable indirect effects on the consequences remain positive.
economic surplus resulting from the avoidance Dutch social welfare:
of such a potential bottleneck. • Network effects. As the port expands, The study from CPB provides a thorough
increasing amounts of cargo will distribute investigation of the project effects, but their
In the chemical sector, on the other hand, from the port to the hinterland. Capacity is measurements may not be fully consistent
customers of settling companies would enjoy available across most network connections, with the changes occurred in reality in
cost advantages because transportation of so that increasing cargo flows can even relevant project-related factors (demand for
chemical products (raw materials, intermediate result in scale economies for the space, PRA pricing strategy, utilization of the
inputs, end products, ...) to Dutch users is infrastructure operators, and more frequent existing port, market developments, etc.). For
cheaper from Rotterdam than from other port and efficient transport services for network this reason, the present evaluation is limited
locations (without MV2, companies divert to users. Capacity shortage could instead to a qualitative analysis of the MV2 welfare
Antwerp, Terneuzen, and so on, which implies emerge on the most used links (A15 effects. Table II provides an overview of the
higher transport costs for Dutch recipients). highway, Betuweroute freight railway, etc.), various impacts, along with their direction and
with congestion and other negative relative magnitude. For the port operator, the
However, CPB (2001a, 2001b) argues that consequences possibly arising. A gradual net effect is specified on the base of PRA’s
potential Dutch users could be reached shift from road to transport modes with a internal business case, while for the other
comparably well also from competing ports, lower environmental impact such as rail, effects it is inferred from CPB (2001a, 2001b).
suggesting that transport benefits for Dutch barge and (for chemicals) pipelines is also
users are likely to be relatively small. Cluster predisposed for the future (see Figure 6). Conclusions about MV2
benefits may also emerge in the port’s Overall, it is uncertain whether the The possibility to create new space within the
chemical industry as companies enjoy the hinterland network will be influenced Rotterdam port complex is expected to bring
advantages of being in close proximity to each positively or negatively. In any case, network about multiple benefits both locally and
other. Taken together, location advantages in effects can be considered of relatively small nationally including:
the chemical sector seem limited compared to consequence, given that without MV2 -B
etter positioning in the market. By
those in the container sector (CPB, 2001b). transportation of cargo would take place expanding and developing industrial and
MV2, mainly through savings in transport anyway and might cover longer origin- transport facilities, PRA is able to overcome
costs, is expected to positively contribute to destination distances (CPB, 2001b). space shortages and realize profitable
sectors other than container/distribution and • Strategic and locational effects. Thanks to investments, seize the opportunities from
chemical (e.g., offshore decommissioning, port development, the Dutch economy, and future market developments in sea
direct reduction of iron, distribution and particularly the Rijnmond region, becomes transport, and gain strategic advantages
empty depots). more accessible and competitive. This with respect to competing European ports.
AMAGER STRAND BEACH
RECLAMATION PROJECT
Copenhagen, capital city of Denmark, ranks
amongst the best world capitals for quality of
life. The local government is keen to further
enhance the urban living environment and has
set ambitious policy plans for the years to
come. Guaranteeing accessibility to quality
Figure 8. Map of Copenhagen (DK) and location of Amager Beach Park (Amager Strandpark). recreational areas is amongst the
government’s priorities as leisure activities are
seen as a key contributor to residents’ health
and well-being (Figure 8).
Overall, Amager Beach Park now encompasses recreational and service facilities including: a set to 30 years following the EC (2008)
the old beach (approx. 25 ha), a new artificial small marina, bathing structures, free parking guidelines for CBA of parks and forests.
island and the lagoon. With the construction space, lifeguards, restrooms and showers, Financial returns are of course not to be
of the artificial island, about 3.5 km of picnic sites, and services such as restaurants, expected from the project, given that access is
additional quality sandy beach became cafes and mobile vendors. As it was designed, free for visitors. As is normally the case for
available to visitors. Since its implementation, the new beach does not provide flood public goods, tax revenues are instead used
the project has been well received by local protection and ecosystem services locally. by local governments for developing and
dwellers. The beach company reckons that the maintaining the beach park. The financial
flow of visitors has increased more than Financial Analysis burden for the community is reflected by a
1 million units per year, making Amager From a financial point of view, the beach negative NPV of around € 43 million.
Strand the first beach in Copenhagen for a reclamation project involves only public
great number of visitors. The new area (the monies. Local government directly financed Socio-economic analysis (CBA)
island plus the lagoon) offers numerous the construction of the park. Net of the The economic analysis looks into all the
recreational opportunities to visitors such as revenues collected through concessions and effects Amager Strand generates on the
fishing, swimming/diving, rowing and rents, total operating costs amount on society, which essentially comprises the
kayaking, kite/wind surfers, skating, jogging average to € 1.07 million per year. By inhabitants of Greater Copenhagen. Beyond
and various ball games (Figure 10). integrating the stream of investment and net the monetary transactions that were examined
operating costs with the costs avoided by not in the financial analysis, the beach project
Both high water quality standards and safe needing sand replenishment (ca. € 13,400 contributes to local welfare by providing
swimming are ensured by a moderate wave spent every two years), the cash-flow can be recreational services to visitors (users).
and tidal exposure and by sufficiently deep easily discounted to determine the (financial)
water around the reclaimed area. A natural NPV of the project (Figure 11). The resulting use-values are related to the
beach environment was reproduced on the consumption of “goods” such as open space,
island through the creation of winding paths, An intermediate value for the discount rate natural landscape, outdoor recreational
broad sandy beaches and low dunes. (5%) is chosen based on Danish standards activities and so on. Such goods do not have
Moreover, the island is equipped with (Doubgaard, 2004), while the time horizon is a market value, so a non-priced effect is
involved here (Table III).
Figure 12. NPV Amager Strand respectively to 3%, 5%, 7% discount rate (CS=€ 4). Figure 13. NPV Amager Strand respectively to 4, 8, 2 CS (€/visit) (discount rate=5%).
project required a relatively small investment probability) with which people visit the beach results when the welfare benefits for visitors
and involves very little economic activity. The is indirectly proportional to the costs they are added to the financial components.
local road traffic has not been particularly incur to travel there. Given the quality of the beach and of its
affected by the increase in visitor flows, as facilities, the visit-CS value chosen is relatively
these use mostly transport modes other than Despite the relatively broad range of values low compared to the € 2-37 reference range
cars (bicycles, public transport). No significant for Consumer Surplus (CS) based on the previously indicated. To derive more
effect on the regional economy and benefit transfer technique resulting from meaningful conclusion on this case study,
employment are to be expected for such a the literature most findings range between however, the NPV calculation is repeated
marginal project. € 2-37. For the determination of the NPV, using different values of both the discount
an arbitrary value of (€ 4 per visit will be rate and the individual consumer surplus per
As indirect effects are assumed to be considered; multiplied by 1 million (the visit (Figures 12 and 13). Apart from the
irrelevant, the estimation of the project NPV average visitors per year), this leads to an various observations that can be made on the
can focus on direct effects only. Non-use annual welfare return of about € 4 million. elasticity of the NPV, an important conclusion
values connected to recreational areas are In respect to the other input variables, an emerging from the sensitivity analysis is that
amongst the most difficult to estimate. intermediate value for the discount rate (5%) the NPV results positive in all scenarios but the
Therefore, the effects on third parties will not is chosen based on Danish standards one with a very low visit-CS. Therefore, the
be included in the NPV calculated for this (Doubgaard, 2004), whilst the time horizon is conclusion of a positive socio-economic
project. With respect to users’ welfare, the set to 30 years following the EC (2008) impact of the beach development project
“travel cost method” is the methodology guidelines for CBA of parks and forests. appears robust to changes in relevant
most commonly used to determine the use parameters.
value of non-market goods. Since there is no Figure 11 shows that the socio-economic
entrance-fee to access public parks, the cost value of the project breaks even 14 years after Conclusions about Amager
of travel to a site (cost of transportation, time the initial investment was made, and This case study well exemplifies a situation
and such) is used as a proxy for the price of corresponds to a positive NPV of about € 17.5 when a reclamation-based investment project
visiting that site. The idea behind the travel million. The figure shows clearly that a very contributes to enhancing quality of life in an
cost method is that the frequency (or different picture of the project profitability urban situation. In addition, other interesting
issues can be deduced from the evaluation of
this case study:
Table III. Socio-Economic Effects of Amager Strandpark. • Project effects can be highly relevant for
Welfare effects Sign/magnitude society even though they do not involve
market transactions.
Direct effects
• Non-market valuation methods are key
•O
perator Negative profit for beach administrator –– instruments for a meaningful evaluation of
(Amager Strandpark I/S) the welfare impacts of public goods such as
recreational resources and green
Welfare surplus from consumption of
•U
sers ++ infrastructures.
recreational services.
• When non-priced, unquantifiable effects are
Non-use values enjoyed by local residents substantial, investments may have benefits
• Third parties +
(option value, altruism, bequest value). for society even if they are not financially
sustainable. In such cases, governments are
Indirect effects Not relevant
called upon to ensure an optimal provision
Does Reclamation Pay? Assessing the Socio-Economic Effects of Reclamation Projects 35