Societal cost-benefit analysis of the Dutch soil remediation operation

17-01-2007 | Publication

The Netherlands Environmental Assessment Agency ‘Societal cost−benefit analysis for soil remediation operations in the Netherlands’, distinguishes four options for future investments. In the zero option government funding will be terminated. Because incentives, including legal ones, do not change, private parties will continue with remediation initiatives. Besides, three policy options are distinguished with government-finance. Soil remediation does deliver benefits to human health, the drinking-water supply, housing, perceptions and the ecosystem. Much of the Netherlands population is concerned about soil contamination.

Benefits of soil remediation noticable

The benefits for health, drinking-water supply and housing are expressed in monetary terms. To what extent these benefits will weigh up to the money that will have to be spent will depend partly on the –value-taxed− discount rate chosen. Use of the current discount rate of 4% will mean a slightly negative balance whatever the policy option chosen. Focusing on non-material benefits, such as ecology, can cause the scales to tip in another direction.

If a lower discount rate is used, benefits that persist into the future, such as health and drinking-water supply, will tend to outweigh the costs. If the discount rate drops to 2% or less, all policy options may lead to a positive balance, i.e. above the zero option. Since a significant part of the health benefits can be realised outside the so-called urgent sites, the option in which all the remediation sites are tackled scores well on a net basis despite the higher costs. Particularly the health benefits that are veiled in uncertainty may be a reason for applying a surcharge and, in turn, a higher discount rate; in this case, all the options will lead to a net negative balance. Weighing up future costs and benefits by means of the discount rate is a political consideration.

This analysis was carried out for the whole soil remediation operation; however, weighing up costs and benefits on remediation components or for individual sites will produce other results. The net benefits of soil remediation on an individual site are – excluding historical causes and type of contamination − particularly dependent on the soil use and population density.

The essence of this societal cost−benefit analysis is to illustrate the efficiency of the different options. Weighing up efficiency against the fairness to individual actors is primarily a political factor in the discussion and has not been dealt with here. By the same token this analysis has not weighed up the efficiency of health benefits via soil remediation to the possible benefits of another (environmental) policy.