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Introduction
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10.1. Introduction
This chapter describes the mitigation measures for each of the five pre-selected Hot Spots with highest priority (see Chapter 9, Table 9.3). All costs and estimates in the Feasibility Analysis are given in 2001 US Dollars. Based on the available design data and financial estimates, and the technical and economic indices for operating enterprises, the uniform methodology for the Dnipro Basin allowed identify the required investments and calculate the damage to be prevented by the planned measures. The efficiency of the investments and their payback periods were determined. Please note that this is a preliminary assessment and prioritization of the Hot Spots, with tentative payback periods for the suggested five-year projects.
The technical, technological and economic data on the high priority Hot Spots, presented in this chapter and its annex, provide the foundation for the national Portfolio of Priority Investments (PIP). Due to the limited resources of this project, this data set was only compiled for those five Hot Spots with the highest priority, as selected through the implementation of the project in the Byelorussian part of the Dnipro Basin. However, this approach can also be applied in the development of preliminary PIPs for other hot spots.
More detailed feasibility analysis of the priority enterprises-polluters (Hot Spots), as well as more detailed analysis of the pollution mitigation measures, will be conducted in the next, that is, the second phase of this project, including the audit of the selected enterprises. The results of the second phase activities can provide the basis for the Investment Portfolios of these enterprises, identifying specific projects and their financial requirements.
10.1.1. Methodology for the Assessment of Economic Effectiveness of Water-Protective Measures
The economic justification of the water protection measures is based on a comparison of the economic benefits from implementing these measures and the cost of their realization.
One of the main objectives of the given methodology has been the identification of the priority Hot Spots, where investments in water-protective measures will allow the obtaining of the best technological and economic results. The methodology to evaluate the economic effectiveness of the water-protective measures was developed jointly by the economic experts, involved in the implementation of this project.
The main calculation formula of the methodology to evaluate the economic effectiveness of water-protective measures, as suggested by the SLE&C, is as follows:
Ef = (ΔU/ΔC)Cse
where Ef – effectiveness of costs of water-protective measures;
ΔU – damage averted due to the water-protective measures, $US thousand/year
(net economic effect);
ΔC – reduced costs of water-protective measures, $US thousand/year;
Cse – socio-economic effect;
ΔU is calculated as difference between the annual economic result of water-protective measures (Er) and reduced costs of water protective measures
ΔU = Er – ΔC
Calculation of ΔC
This indicator describes the costs required for the construction (including reconstruction, modernization and extension) of the treatment facilities, reuse systems of exhaust technological water (circulating, sequential, recycling and closed loop systems for technical water supply) and the introduction of new water efficient technologies for core production to reduce the discharge of pollutants into the water body. The reduced discharge of pollutants into the water body will respectively decrease the damage caused by the water user to the water ecosystem. The preliminary analysis is restricted to water pollution only.
The values of K and Tc can be obtained from the following sources:
- directly from the enterprise if the design estimates, requisitions, etc. are available;
- from aggregative specific indicators from reference books.
The cost of averted damage caused by pollution of the water body (Da), including the increment of the earlier loss of profit (I) is assumed as the economic result of the water-protective measures (Er).
Er = Da + I
Incremental financial/economic benefit (I) includes:
- additional product (additional profit);
- reduced annual costs of the water user from increase quality of water in the water body resulting from the water-protective measures;
- additional revenues to the budgets of all levels.
Professional judgment assumes it as 10% of value of averted damage (Da). Thus, actual equation is: Er = 1.1 * Da.
The economic assessment of the annual damage Da, averted due to the reduced volume of pollutants discharged with effluent into the water bodies, is calculated by the formula:
Da = B x β x M,
where М = 
Di Vit,
B – monetary value of discharge in conventional tonnes of pollutant, $US 275/c. T.
β – coefficient, taking into account the features of the affected water body. Its values are: for Dnipro from the source to the City of Kyiv – 1.8; for Pripyat – 1.4; for Berezina – 2.0. The total share of Belarus for the Dnipro Basin has the coefficient of 1.75.
М – reduced effective mass of the annual collection of all pollutants (c. t. /year) depending upon its toxicity (hazard);
Di - indicator of relative hazard of discharge into the water body of a specific (i) pollutant, equal to the reciprocal of MAC, that is 1/MAC;
Vit – volume/mass of discharge of pollutant i for year t.
Pay-back period (T) of capital investments in water-protective measures is:
Т=К/
U (years)
The effective recoupment of the capital investments in wastewater treatment facilities is 14 years and less.
Cse – the socio-economic coefficient takes into account the impact of the Hot Spot on recipients due to the pollution of the water bodies, which results in incremental costs for the treatment of water consumed by the water users (population, industry, agriculture, industrial fishing); decreased quality of arable land; and, effects on public health, which also leads to incremental costs, etc.
The socio-economic coefficient also demonstrates the macroeconomic, social and demographic significance of the enterprise – Hot Spot, thus raising its social level and encouraging the government to grant it economic support for addressing the water protection goals. [highest value indicates most severe socio-economic effect]
Calculation of ΣCse, which has been based on professional judgment with respect to various factors, is done by the following formula:
ΣCse = C1se + C2se + …Cnse,
where C1se, C2se, Cnse - estimates for 1, 2, …, n factors.
After calculation, the values of C1se, C2se, Cnse for 5 Hot Spots are ranked.
For Belarus, five groupings of coefficients ΣCse are calculated and ranked, as follows
C1se = 1.,10 – corresponds to the maximum value of ΣCse
C2se = 1.,08 – second highest ΣCse
C3se = 1.,06 – third highest ΣCse
C4se = 1.,04 – fourth highest ΣCse
C5se = 1.,02 – fifth highest ΣCse
The calculation of the economic damage from the pollution of the water bodies was based on the “Interim Standard Methodology to Evaluate Economic Effectiveness of Environmental Measures and Assess Economic Damage Caused to the National Economy by Environmental Pollution”. Moscow, Economics, 1986.
It is assumed that in the development of the Priority Investment Portfolio that the focus will be mainly on technical solutions (new facilities and treatment methods for polluted effluents), and additional measures such as an analysis of taxes, rates, user pay, subsidies possibility of subsidies, bonuses, etc. will be used. Development of proposed budgets for monitoring and control will be analyzed in the subsequent phase of the project.
