Cost-Benefit Analysis and Financial Viability of Household Biogas Plant Installation in Aleta Wondo District, Southern Ethiopia

2021 ◽  
Author(s):  
Tale Gedefa ◽  
Yoseph Melka ◽  
Getachew Sime
Keyword(s):  
Discount Rate ◽  
Household Income ◽  
Cost Benefit Analysis ◽  
Cost Benefit ◽  
Plant Size ◽  
Southern Ethiopia ◽  
Financial Viability ◽  
Benefit Analysis ◽  
Chemical Fertilizers ◽  
Lower Plant

Abstract Background: Installation of biogas plants has both costs and incomes; installation and maintenance service demand financial costs and reduction of costs for purchasing firewood, kerosene and chemical fertilizers are benefits or incomes. This study investigates the cost-benefit analysis and financial viability related to biogas plant installation in Southern Ethiopia. Method: A multi-stage sampling technique was employed to select sample households. A total of 105 adopter households were selected for household survey.Results and conclusion: The installation cost took the largest share of the total cost of installation and was one of the main constraints that hindered installation. Installation increased household income by reducing the costs incurred for buying firewood, kerosene and chemical fertilizers. Relatively, lower plant size was more profitable than larger plant size. Installation under the subsidy scheme was more financially viable at 10 % discount rate than its counterparts. The profitability of lower plant size was more sensitive to changes in the discount rate, the level of expenditure saving and input price than larger plant size, under an assumption and without subsidy. Installation of low cost plants could more attract the engagement of a large number of rural households with low economic capacity. Besides, installation of lower plant sizes could more substantially enhance household income by saving costs incurred for buying firewood, kerosene and chemical fertilizers.

The Role of the Discount Rate in Cost–Benefit Analysis Between Theory and Practice: A Comparative Survey

2013 ◽  
Vol 4 (1) ◽  
pp. 59-71
Author(s):  
Felice Simonelli
Keyword(s):  
Discount Rate ◽  
Cost Benefit Analysis ◽  
Cost Benefit ◽  
Theory And Practice ◽  
Benefit Analysis ◽  
Economic Literature ◽  
Institutional Practice ◽  
Two Samples ◽  
Regulatory Decisions

This study focuses on the role of the discount rate in cost–benefit analysis (CBA) of regulation, providing a systematic investigation into regulatory practice vis–à–vis the existing economic theories. In the first part, a quick survey of the main economic literature on the social discount rate (SDR) is presented. In the second part, the current institutional practice is investigated, firstly comparing the recommendations on discounting issued by institutional actors in the US (Office of Management Budget, Environmental Protection Agency) and the EU (Commission), and secondly examining the SDRs adopted in two samples of CBAs selected among Regulatory Impact Analyses of US EPA and Impact Assessments of EU Directorate–General for the Environment. A gap exists between economic theory and institutional practice in the selection of the SDR. Regulatory decisions which are based on CBA reflect the most workable economic literature on discounting rather than the most theoretically consistent one, thus yielding less reliable and less robust results. Scholars who aim at improving the quality of rule–making and at fostering the application of CBA in regulatory decisions should improve the “operational validity” of their research, thus providing practitioners with methods that are both consistent and workable.

scholarly journals The Social Cost of Sub-Soil Resource Use

Resources ◽  
2019 ◽  
Vol 8 (1) ◽  
pp. 19 ◽  
Author(s):  
Tom Huppertz ◽  
Bo Weidema ◽  
Simon Standaert ◽  
Bernard De Caevel ◽  
Elisabeth van Overbeke
Keyword(s):  
Life Cycle Assessment ◽  
Life Cycle ◽  
Discount Rate ◽  
Social Cost ◽  
Cost Benefit Analysis ◽  
Market Price ◽  
Cost Benefit ◽  
Benefit Analysis ◽  
Hotelling Rule ◽  
The Social

This paper presents a market-price-based method to value sub-soil resources in environmental Cost-Benefit Analysis and Life Cycle Assessment. The market price incorporates the privileged information of the market agents, explicitly or implicitly anticipating future applications of the resource, future backstop technologies, recycling potentials, the evolution of reserves and extraction costs. The market price is therefore considered as the best available integrated information reflecting the actual values of these parameters. Our method is based on the Hotelling rule and the fact that private agents discount future costs and benefits at a higher rate than society as a whole. In practice, the price of the last resource unit sold is calculated with the Hotelling rule using a market discount rate. Then, the price at depletion is retropolated with a social discount rate smaller than the market discount rate. The resulting corrected “socially optimal” price is higher than the market price. The method allows to calculate the social cost of resource exhaustion, which is applicable in Cost-Benefit Analysis and Life Cycle Assessment. The method is applied to mineral and fossil resources and the results are compared with other recent methods that seek to place a monetary value on resource depletion.

Gamma Discounting

2001 ◽  
Vol 91 (1) ◽  
pp. 260-271 ◽  
Author(s):  
Martin L Weitzman
Keyword(s):  
Probability Distribution ◽  
Discount Rate ◽  
Theoretical Approach ◽  
Cost Benefit Analysis ◽  
Cost Benefit ◽  
Benefit Analysis ◽  
Wide Spread ◽  
Social Discount Rate ◽  
Numerical Example ◽  
Over Time

By incorporating the probability distribution directly into the analysis, this paper proposes a new theoretical approach to resolving the perennial dilemma of being uncertain about what discount rate to use in cost-benefit analysis. A numerical example is constructed from the results of a survey based on the opinions of 2,160 economists. The main finding is that even if every individual believes in a constant discount rate, the wide spread of opinion on what it should be makes the effective social discount rate decline significantly over time. Implications and ramifications of this proposed “gamma-discounting” approach are discussed. (JEL H43)

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