Renovating Cost-Benefit Analysis of Public Water Infrastructure for a Risky World

Photo credit: Paul Wyrwoll

Research team

Research summary

Large water infrastructure projects and programs are inherently risky because of their complexity, scale, and long lifespan. Global experience shows that underestimated costs and overestimated benefits are the norm for megadams. Any water infrastructure planning process must consider risks across future water supply and demand, climate change, environmental impacts, and technology change. Government agencies often use cost-benefit analysis (CBA) to estimate the monetary value of project impacts on social welfare and assess whether expected benefits outweigh costs.

Large water infrastructure projects and programs are inherently risky because of their complexity, scale, and long lifespan. Global experience shows that underestimated costs and overestimated benefits are the norm for megadams. Any water infrastructure planning process must consider risks across future water supply and demand, climate change, environmental impacts, and technology change. Government agencies often use cost-benefit analysis (CBA) to estimate the monetary value of project impacts on social welfare and assess whether expected benefits outweigh costs. However, the evaluation of risks and the non-market value of environmental impacts in CBA is often limited and modern innovations in decision analysis are under-utilised. This is a problem because poor decisions can lock in negative social, environmental, and economic outcomes for decades.

This project examines the state of sensitivity/risk analysis and environmental valuation for water project CBAs in Australia and the Asia-Pacific. A review of regulatory guidelines and completed CBAs, a practitioner survey, and data visualisations inform workshops to co-design methodological innovations with researchers and policy-makers. The project provides the foundation for a research program on the economics of water infrastructure projects at the Centre for Water Economics, Environment and Policy in the ANU Crawford School.

Updated:  28 May 2024/Responsible Officer:  Crawford Engagement/Page Contact:  CAP Web Team