Comprehensive Option Assesment - UNEP

Module 1: Basic Introduction
With few exceptions, an inclusive institutional and policy structure capable of dealing with a spectrum of options has been slow to emerge in
developing countries. Small-scale infrastructure alternatives have often not received integrated planning support, impeding their ability to emerge
as competitive solutions. Those promoting non-structural alternatives have rarely offered an adequate political counterbalance to the interests
promoting large-scale infrastructure. The fact that actors back particular options has often obstructed proper consideration of other viable
alternatives.
As a result, smaller-scale options continue to be viewed as secondary to large projects. China provides an example of a country that has mixed both
small- and large-scale. It has the world's largest programme for the development of small-scale rural and appropriate technology, while at the same
time it has built half the world's large dams.
Whether failure to adequately assess all the options implicitly leads to the selection of large-scale infrastructure projects over other equally attractive
or even superior options is difficult to say. Certainly, the options currently available reflect not only continued technological development over the
last 50 years but also more recent efforts to find locally appropriate, small-scale solutions that have benign social and environmental impacts, and
the recognition that human rights are a legitimate and fundamental part of the development equation.
Parameters for project appraisal
Cost–benefit analysis (CBA) emerged between the 1950s and 1970s as the dominant economic tool supporting decision making on large-scale
projects. Initially it was limited to a number of parameters, most of them internal and relatively easy to assign values to. Efforts in the last two
decades to expand the scope of CBA to cover social and environmental issues have rarely led to comprehensive social and environmental valuation,
and have usually been limited to incorporating the costs of resettlement and environmental mitigation.
Review of multilateral bank appraisals and the performance of CBA more generally leads to the following conclusions on the adequacy of CBA as
applied to the appraisal of large-scale infrastructure projects:
Projections of project costs are systematically understated.
Social and environmental impacts are not valued explicitly or are only indirectly accounted for through mitigation or resettlement budgets.
They have difficulty predicting growth in demand and final design capacity (hydropower, irrigation and other benefits).
They have difficulty predicting market conditions and end-user behaviour over time.
The employ social discount rates that are too high.
Sensitivity and risk analysis is inadequate.
A number of the weaknesses of CBA may lead to overstatement of the net project benefits. Moreover, influences from the wider political economy
also filter through into the process of undertaking CBA. In some cases, early political or institutional commitment to a project became overriding
factors, leading subsequent economic analyses to justify a decision that had in fact already been taken.
Comprehensive Options Assessment for sustainable development of infrastructure
Training Manual
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