JASPERS in the Environment, Energy and Municipal Sectors Cost – Benefit Analysis

1. JASPERS in the Environment, Energy and Municipal Sectors Cost – Benefit Analysis Prague, 28th November 2007

2. Components and Key Issues of CBA • Purpose of Cost Benefit Analysis • Identify sustainability and viability issues; • Optimise scope of the project and its individual components; • To determine level of support realisable from EU Cohesion Fund; • Methodology requirements and Jaspers involvement • Outlined in Working Document 4 with some changes made to previous guidelines; • Advice on interpretation of guidelines; • Review and assistance in the preparation of cost – benefit analysis

3. Type of Past JaspersInvolvement • Methodology Queries • Preparation of CBA guidelines in Romania and Bulgaria; • Update of guidelines in Poland; • Methodology guidelines for demand and risk assessment in Slovakia; • Questions concerning interpretation of guidelines • Preparation of CBA • Support in ensuring most appropriate option is selected; • Review and advice on optimisation of EU grant contribution and calculation of the contribution; • Advice on wider affordability and sustainability issues and methods to improve project sustainability;

4. Key Issues : Lower Sustainability • EU compliance requirements • Wastewater : services to populations above 2,000; • Wastewater : higher degree of treatment and sludge management issues; • Solid waste : landfill rehabilitation and diversion requirements; • Energy : focus of carbon reduction and efficiency • Issues • Higher costs of the project with impact on affordability; • Changes in the methodology in particular the calculation of the EU grant element; • Less tangible benefits reducing economic benefits;

5. Key Issues : Reduced Funding Gap • Change in methodology with inclusion of maximum co-funding rate fixed for the priority axis • EU Grant = Decision Amount * Maximum Co-Funding Rate • The inclusion of Maximum rate reduces the funding amount, but project scope means that greater financial sustainability issues should arise; • Project options to overcome issues • Ensuring optimum calculation of incremental revenue with complexities associated with common tariff levels; • Establishing adequate basis for calculation of incremental operating costs • Ensuring cost eligibility; • Identification and optimisation of additional sources of finance to support EU grant;

6. Concluding Remarks • CBA is central to the feasibility study and application process • Assists in optimising the project • Provides the basis for determining level of EU financing support; • Projects are excepted to be less sustainable • Higher cost projects owing to development status and EU compliance needs; • Change in methodologies mean that lower EU financial support can be expected; • Jaspers assistance; • To improve project financial, cost and economic sustainability; • Ensure that best practices are applied in project evaluation and comply with EU evaluation needs;