Sustainability criteria and cost–benefit analysis: an analytical framework for environmental–economic decision making at the project level

Abstract

This article develops a framework for environmental–economic decision-making in a single project case that includes the ecological sustainability criteria, environmental costs, natural resource scarcity prices and local peoples’ preferences and presents a case study of the lowland irrigated agriculture system. The geographic information system (GIS) technique has been used for evaluating ecological criteria and integrating information for use in the cost–benefit analysis at different levels of computation process. The environmental costs and economic value of water associated with the lowland irrigated agriculture are estimated using both the direct and indirect economic valuation approaches. Various sets of alternatives were designed for promoting sustainable use of resources, and the net present value is estimated in each of these cases by incorporating environmental costs and economic values of water obtained from different methods. The cost–benefit analysis (CBA) carried out in these different cases indicated that diversification of crops, rather than the conventional monocropping system, would promote sustainable resource use and generate higher benefits to the farmers and society, if external costs, such as environmental costs and scarcity value of irrigation water, and ecological sustainability criteria are also considered in the economic decision-making process. The results of the case study also indicated that sustainability criteria could well be incorporated into the CBA in a single project case by addressing local people's concerns, resource scarcity values and ecological sustainability criteria with the use of spatial analysis techniques such as GIS.