Incorporating environmental value and externality in project evaluation as a sustainability indicator to evaluate Bangladesh water development

A major difficulty of conventional cost benefit analysis is that it will allow choosing an alternative among others only on the criterion of economic efficiency: that the selected project or activity has been proven to produce economic benefits over costs for the period of the project. An analysis of this kind generally does not create a problem if the costs and benefits series are easy to quantify and clearly identifiable. However, almost all projects linked with the environment are clear exceptions to this category. Many environmental projects are facing a difficulty of evaluating the success based on economic efficiency due to two reasons: (a) environmental benefits are difficult to quantify and (b) environmental interactions that will cause severe externalities are difficult to predict. The main objective of this paper is to suggest a new method that can be used to overcome such difficulties in environmental projects. Data used in this analysis will demonstrate a practical approach to evaluate environmental projects. The evaluation proposed is different to traditional analysis in that it has been based on a large programme of primary research and has included efforts to achieve a consensus of all stakeholders, including those directly involved in project implementation.