Standard transport appraisal methods

Policy makers often want to receive structured information regarding the impacts of transport policy options before they take a decision. To provide such information governments often choose to use standard appraisal methods being Cost-Benefit Analysis (CBA), Multi-Criteria Analysis (MCA) or Environmental Impact Assessment (EIA). Before we introduce various non-standard appraisal methods in this book volume, this chapter sets the stage by discussing the main characteristics of these three standard appraisal methods. CBA measures a project's societal value by transferring the project's societal effects into monetary terms using the notion of the amount of money individuals are willing to pay from their private income. These monetary impacts are aggregated into a final indicator such as the net present value (NPV). If the NPV is positive the project is considered to be welfare enhancing. MCA identifies criteria against which to test transport policy options. Next, the different criteria are weighted or scored to arrive at a ranking of options. An EIA is an evaluation of the likely effects of a project that significantly affect the environment. The most important difference between CBA and MCA is that the former method is based on welfare economics which provides strict procedures for the criteria/impacts that are considered in the analysis and for the weighting of project impacts, while in an MCA there is more freedom with respect to the selection of evaluation criteria and procedures to determine the weights. The most important difference between CBA and MCA on the one hand and EIA on the other hand is that EIA puts emphasis on a specific set of effects being the environmental impacts of a project.