Thailand, 27-28 November 2017 - UNDP and GIZ partnered with the Thailand Office of Agriculture Economics (OAE) to launch a workshop designed to connect vital stakeholders to build an effective National Adaptation Plan. The two-day workshop at the Rama Garden Hotel had 20 participants from each department under the Ministry of Agriculture and Cooperatives (MOAC). The workshop was designed to build capacity of planning officers to formulate better projects and budget submissions as well as potential climate finance proposal using cost-benefit analysis and ecosystem-based analysis appraisal tools.

1. Cost-Benefit Analysis: Advanced Training
Presentation by Dr. Benoit Laplante
Bangkok, Thailand
November 27-28, 2017
Session 2:
Enhancing climate resilience in Thailand through effective
water management and sustainable agriculture

2. Cost-Benefit Analysis: Advanced Training
Presentation by Dr. Benoit Laplante
Bangkok, Thailand
November 27-28, 2017
OR

3. Cost-Benefit Analysis: Advanced Training
Presentation by Dr. Benoit Laplante
Bangkok, Thailand
November 27-28, 2017
Session 2:
How to do CBA with incomplete information
and little time

4. 4
4) Estimating economic benefits on agriculture
3) Nature of benefits
2) Estimated costs
Outline of presentation
1) Context and project description
7) Sensitivity analysis
6) Estimating net present value
5) Estimating economic benefits of reduced flood damages
8) Recommendations

5. 5
4) Estimating economic benefits on agriculture
3) Nature of benefits
2) Estimated costs
Outline of presentation
1) Context and project description
7) Sensitivity analysis
6) Estimating net present value
5) Estimating economic benefits of reduced flood damages
8) Recommendations

6. 6
Context
The Government of Thailand intends to request financial
support from the Green Climate Fund (GCF) to fund an
investment project in north central Thailand.
Proposals submitted to GCF MUST contain an economic
analysis – and sometimes also a financial analysis.
In a GCF proposal:
Section E.6: Efficiency and Effectiveness (discuss economic and, if
appropriate, financial soundness of the project).
Section F.1: Economic and Financial Analysis.
Annex XII: Economic Analysis (detailed economic analysis plus
Excel spreadsheet with economic analysis).

7. 7
Project description
Sukhothai Uttaradit Phitsanulok
The project is taking place in 3 provinces of Thailand:
Phitsanulok, Uttadit and Sukothai.

8. 8
Project description
Problem:
Climate projections: A significantly greater frequency and intensity of
flooding during wet season, and extended drought periods during the
dry season, presenting a significant challenge to effective water
management in Thailand.

9. 9
Project description
Problem:
Flood and drought events have become more severe, causing losses
and damages to crop production and farmers’ income.
Higher levels of poverty for the Northern-Central region in turn, means
that this area also has an increased level of vulnerability to climate
change impacts, with lower levels of access to resources for
adaptation strategies and in which to build climate resilience.
Calculations for the region, found that on average (with variations
between the provinces) during 2040 -2049, farmland values per rai, are
projected to decrease from $2,703 to $2,068 and $2,538 per rai in
climate scenarios A2 and B2 respectively.

10. 10
Project description
Overall purpose of proposed project
The objective of the proposed GCF project is to adapt water management
and use in the Yom and Nan river basins to changing climatic conditions.
4 components
• Improved climate and risk informed planning in the water and
agricultural sectors.
• Strengthened water management infrastructure for greater resilience
to projected climate change.
• Increased resilience of agriculture livelihoods in drought and flood
prone areas.
• Project management

11. 11
Project description

12. 12
4) Estimating economic benefits on agriculture
3) Nature of benefits
2) Estimated costs
Outline of presentation
7) Sensitivity analysis
6) Estimating net present value
5) Estimating economic benefits of reduced flood damages
8) Recommendations
1) Context and project description

13. 13
Estimated costs
Output Total cost ($) GCF funding Co-financing
Output 1 8,600,000 4,600,000 4,000,000
Output 2 85,000,000 28,000,000 57,000,000
Output 3 5,900,000 4,900,000 1,000,000
Output 4 2,500,000 1,500,000 1,000,000
Total 102,000,000 39,000,000 63,000,000
TOTAL PROJECT COST AND FINANCING PER OUTPUT
Question: When conducting the economic analysis of this
project, is it important to distinguish between “GCF
funding” and “Co-financing”?

14. 14
Estimated costs
Output Total cost ($) GCF funding Co-financing
Output 1 8,600,000 4,600,000 4,000,000
Output 2 85,000,000 28,000,000 57,000,000
Output 3 5,900,000 4,900,000 1,000,000
Output 4 2,500,000 1,500,000 1,000,000
Total 102,000,000 39,000,000 63,000,000
TOTAL PROJECT COST AND FINANCING PER OUTPUT
Warning: These are financial costs provided by engineers
and project preparation teams. These are not economic
costs.
Please describe an important difference between financial
and economic costs.

15. 15
Estimated costs
Output Total cost ($) GCF funding Co-financing
Output 1 8,600,000 4,600,000 4,000,000
Output 2 85,000,000 28,000,000 57,000,000
Output 3 5,900,000 4,900,000 1,000,000
Output 4 2,500,000 1,500,000 1,000,000
Total 102,000,000 39,000,000 63,000,000
TOTAL PROJECT COST AND FINANCING PER OUTPUT
Warning: The total cost of this project is estimated to be
$102 million. Will this capital investment take place in one
year?
If not, then we need the annual breakdown of that
investment.

16. 16
Estimated costs
Output Total cost ($) GCF funding Co-financing
Output 1 8,600,000 4,600,000 4,000,000
Output 2 85,000,000 28,000,000 57,000,000
Output 3 5,900,000 4,900,000 1,000,000
Output 4 2,500,000 1,500,000 1,000,000
Total 102,000,000 39,000,000 63,000,000
TOTAL PROJECT COST AND FINANCING PER OUTPUT
Total 2018 2019 2020 2021 2022
102,000,000 14,600,000 20,950,000 26,200,000 25,200,000 15,050,000
Annual breakdown

17. 17
Estimated costs
Output Total cost ($) GCF funding Co-financing
Output 1 8,600,000 4,600,000 4,000,000
Output 2 85,000,000 28,000,000 57,000,000
Output 3 5,900,000 4,900,000 1,000,000
Output 4 2,500,000 1,500,000 1,000,000
Total 102,000,000 39,000,000 63,000,000
TOTAL PROJECT COST AND FINANCING PER OUTPUT
Are we done with the costs component of the CBA?
How about the operation and maintenance costs?

18. 18
How about the operation and maintenance costs?
We read in the proposal: “Once the totality of assets is in
place, annual operation and maintenance (O&M) costs
have been estimated to be $1,120,000.”
What to do with this information?
Easiest approach would be: Investment is taking place
from 2018 to 2022. For those years, we will put ZERO
(O&M), and then we will enter $1,120,000 in 2023.
Another approach?
Estimated costs

19. 19
Estimated costs
We have the annual breakdown of the capital cost:
Total 2018 2019 2020 2021 2022
102,000,000 14,600,000 20,950,000 26,200,000 25,200,000 15,050,000
This implies the following disbursement schedule (% of
disbursement):
2018 2019 2020 2021 2022 2023
14.3 20.5 25.7 24.7 14.8
14.3 34.9 60.5 85.2 100.0
First row: % annual disbursement
Second row: Cumulative % disbursement
What could we do with this information?

20. 20
Estimated costs
2018 2019 2020 2021 2022 2023
14.3 20.5 25.7 24.7 14.8
14.3 34.9 60.5 85.2 100.0
First row: % annual disbursement
Second row: Cumulative % disbursement
We could say: Assume that O&M in Year 2019 will be 14.3%
of total estimated O&M; 34.9% in Year 2020, etc.
2018 2019 2020 2021 2022 2023 +
160,314 390,353 678,039 954,745 1,120,000

21. 21
4) Estimating economic benefits on agriculture
3) Nature of benefits
2) Estimated costs
Outline of presentation
7) Sensitivity analysis
6) Estimating net present value
5) Estimating economic benefits of reduced flood damages
8) Recommendations
1) Context and project description

22. 22
Nature of benefits
2 types of benefits
Preventing a decline of agricultural productivity resulting
from climate change.
Mitigating damages from future floods.

23. 23
4) Estimating economic benefits on agriculture
3) Nature of benefits
2) Estimated costs
Outline of presentation
7) Sensitivity analysis
6) Estimating net present value
5) Estimating economic benefits of reduced flood damages
8) Recommendations
1) Context and project description

24. 24
Estimating economic benefits to agriculture
Please discuss methodological framework you would use to
estimate the potential economic benefits of the proposed
investment project on agriculture.

25. 25
Agriculture benefits
Methodological approach:
1. Determine the number of rais (area) benefiting from the project
investment.
2. Assess the potential impacts of climate change on productivity
without project (scenario with climate change, without project).
3. Assess the potential impacts of the project on productivity (scenario
with climate change, with project).
The difference between the “yield with project” and “yield without
project” will be the benefits of the project measured in physical terms
(incremental quantity of agricultural output).
4. Compute the net economic returns of the incremental agricultural
output allowed by the project.

26. 26
Agriculture benefits
Number of rais (area) benefiting from the project investment.
Province District Sub-district Cultivated
area (rai)
Uttaradit Phichai Phrayaman 20,000
Total 20,000
Phitsanulok Phrom Phiram Wang Won 22,000
Taluk Thiam 25,000
Si Phirom 30,000
Nong Khaem 33,200
Phrom Phiram 2,500
Tha Chang 4,900
Muang Ban Krang 5,000
Bang Rakam Tha Nang Ngam 52,000
Churn Saeng
Songkram
10,000
Bang Rakam 8,000
Total 192,600
Sukhothai Kong Krilat Ban Mai Suk
Kasem
15,000
Kok Raet 15,000
Kri Nok 20,000
Kri Klang 20,000
Kri Nai 15,000
Dong Dueai 15,000
Total 100,000
Total 312,600

27. 27
Agriculture benefits
Potential impacts of CC without project
We know the following (existing productivity):
Year Planted area
(rai)
Harvested area
(rai)
Production
(tons)
Yield per rai
(kg)
2013 616,339 610,573 388,020 636
2014 589,182 585,648 361,239 617
2015 473,513 459,307 292,809 638
Year Planted area
(rai)
Harvested area
(rai)
Production
(tons)
Yield per rai
(kg)
2013 1,444,387 1,414,567 876,308 619
2014 1,359,936 1,344,194 782,776 582
2015 1,036,758 1,287,755 725,113 563
Uttaradit:
Phitsanulok:
Year Planted area
(rai)
Harvested area
(rai)
Production
(tons)
Yield per rai
(kg)
2013 1,126,723 1,102,800 645,638 585
2014 1,036,758 1,012,633 577,418 570
2015 1,102,633 729,874 392,207 537
Sukhothai:

28. 28
Agriculture benefits
Potential impacts of CC without project
What is next question to ask?
What could happen to these yields in the future without the project?
Go to literature.
Then what do we do?
Given the above uncertainty, the economic analysis assumes a
reduction of 5%, 10%, and 15% and 20% by 2042.

29. 29
Agriculture benefits
2018 2020 2025 2030 2035 2040 2042
Minus 5% by
2042
Phitsanulok 588 586.8 585.6 584.3 583.1 581.9 558.6
Sukhothai 564 562.8 561.7 560.5 559.3 558.1 535.8
Uttaradit 630 628.7 627.4 626.1 624.8 623.4 598.5
Minus 10% by
2042
Phitsanulok 588 585.6 583.1 580.7 578.2 575.8 529.2
Sukhothai 564 561.7 559.3 557.0 554.6 552.3 507.6
Uttaradit 630 627.4 624.8 622.1 619.5 616.9 567.0
Minus 15% by
2042
Phitsanulok 588 584.3 580.7 577.0 573.3 569.6 499.8
Sukhothai 564 560.5 557.0 553.4 549.9 546.4 479.4
Uttaradit 630 626.1 622.1 618.2 614.3 610.3 535.5
Minus 20% by
2042
Phitsanulok 588 583.1 578.2 573.3 568.4 563.5 470.4
Sukhothai 564 559.3 554.6 549.9 545.2 540.5 451.2
Uttaradit 630 624.8 619.5 614.3 609.0 603.8 504.0
Projected Yield with Climate Change without Project (kg per rai)

30. 30
Agriculture benefits
2018 2020 2025 2030 2035 2040 2042
Minus 5% by 2042
Phitsanulok 113,249 112,777 111,597 110,418 109,238 108,058 107,586
Sukhothai 56,400 56,165 55,578 54,990 54,403 53,815 53,580
Uttaradit 12,600 12,548 12,416 12,285 12,154 12,023 11,970
Total 182,249 181,489 179,591 177,693 175,794 173,896 173,136
Minus 10% by 2042
Phitsanulok 113,249 112,305 109,946 107,586 105,227 102,868 101,924
Sukhothai 56,400 55,930 54,755 53,580 52,405 51,230 50,760
Uttaradit 12,600 12,495 12,333 11,970 11,708 11,445 11,340
Total 182,249 180,730 176,933 173,136 169,340 165,543 164,024
Minus 15% by 2042
Phitsanulok 113,249 111,833 108,294 104,755 101,216 97,677 96,261
Sukhothai 56,400 55,695 53,933 52,170 50,408 48,645 47,940
Uttaradit 12,600 12,443 12,049 11,655 11,261 10,868 10,710
Total 182,249 179,971 174,275 168,580 162,885 157,190 154,911
Minus 20% by 2042
Phitsanulok 113,249 111,361 106,643 101,924 97,205 92,487 90,599
Sukhothai 56,400 55,460 53,110 50,760 48,410 46,060 45,120
Uttaradit 12,600 12,390 11,865 11,340 10,815 10,290 10,080
Total 182,249 179,211 171,618 164,024 156,430 148,837 145,799
Projected Yield with Climate Change without Project (tons)

31. 31
Agriculture benefits
Projected agriculture yield with project
Activities of a similar nature have been recently implemented in
Thailand. Under such circumstances, yields have been shown to
reach between 750 and 1,000 kg per rai. For purpose of this economic
analysis, the lower bound value of 750 kg per rai is used in the
analysis.
How to answer this?
Now we can calculate how many more kg of rice we may get as a
result of the project.

32. 32
Agriculture benefits
2018 2020 2025 2030 2035 2040 2042
Minus 5% by 2042
Phitsanulok 0 11,039 32,853 34,032 35,212 36,392 36,864
Sukhothai 0 6,565 19,423 20,010 20,597 21,185 21,420
Uttaradit 0 855 2,584 2,715 2,846 2,978 3,030
Total 0 18,458 54,849 56,757 58,656 60,554 61,314
Minus 10% by 2042
Phitsanulok 0 11,203 34,504 36,864 39,223 41,582 42,526
Sukhothai 0 6,646 20,245 21,420 22,595 23,770 24,240
Uttaradit 0 873 2,768 3,030 3,292 3,555 3,660
Total 0 18,723 57,517 61,314 65,110 68,907 70,426
Minus 15% by 2042
Phitsanulok 0 11,368 36,156 39,695 43,234 46,773 48,189
Sukhothai 0 6,728 21,068 22,830 24,593 26,355 27,060
Uttaradit 0 891 2,951 3,345 3,739 4,133 4,290
Total 0 18,988 60,175 65,870 71,565 77,260 79,539
Minus 20% by 2042
Phitsanulok 0 11,532 37,807 42,526 47,245 51,963 53,851
Sukhothai 0 6,810 21,890 24,240 26,590 28,940 29,880
Uttaradit 0 910 3,135 3,660 4,185 4,710 4,920
Total 0 19,252 62,832 70,426 78,020 85,613 88,651
Incremental quantity of rice as a result of the project (tons)

33. 33
Agriculture benefits
What is next question to ask?
What is economic value of this incremental quantity of rice?
Net economic value: $0.15 per kilogram.

34. 34
Agriculture benefits
2018 2020 2025 2030 2035 2040 2042
Minus 5% by 2042
Phitsanulok 0 1,655,849 4,927,912 5,104,863 5,281,814 5,458,766 5,529,546
Sukhothai 0 984,683 2,913,375 3,001,500 3,089,625 3,177,750 3,213,000
Uttaradit 0 128,215 387,563 407,250 426,938 446,625 454,500
Total 0 2,768,747 8,228,849 8,513,613 8,798,377 9,083,141 9,197,046
Minus 10% by 2042
Phitsanulok 0 1,680,519 5,175,644 5,529,546 5,883,449 6,237,351 6,378,912
Sukhothai 0 996,968 3,036,750 3,213,000 3,389,250 3,565,500 3,636,000
Uttaradit 0 130,960 415,125 454,500 493,875 533,250 549,000
Total 0 2,808,447 8,627,519 9,197,046 9,766,574 10,336,101 10,563,912
Minus 15% by 2042
Phitsanulok 0 1,705,188 5,423,375 5,954,229 6,485,083 7,015,936 7,228,278
Sukhothai 0 1,009,254 3,160,125 3,424,500 3,688,875 3,953,250 4,059,000
Uttaradit 0 133,705 442,688 501,750 560,813 619875 643,500
Total 0 2,848,146 9,026,188 9,880,479 10,734,770 11,589,062 11,930,778
Minus 20% by 2042
Phitsanulok 0 1,729,857 5,671,107 6,378,912 7,086,717 7,794,522 8,077,644
Sukhothai 0 1,021,540 3,283,500 3,636,000 3,988,500 4,341,000 4,482,000
Uttaradit 0 136,449 470,250 549,000 627,750 706,500 738,000
Total 0 2,887,846 9,424,857 10,563,912 11,702,967 12,842,022 13,297,644
Estimated Benefits of the Project on Agricultural Output ($)

35. 35
4) Estimating economic benefits on agriculture
3) Nature of benefits
2) Estimated costs
Outline of presentation
7) Sensitivity analysis
6) Estimating net present value
5) Estimating economic benefits of reduced flood damages
8) Recommendations
1) Context and project description

36. 36
4) Estimating economic benefits on agriculture
3) Nature of benefits
2) Estimated costs
Outline of presentation
7) Sensitivity analysis
6) Estimating net present value
5) Estimating economic benefits of reduced flood damages
8) Recommendations
1) Context and project description

37. 37
4) Estimating economic benefits on agriculture
3) Nature of benefits
2) Estimated costs
Outline of presentation
7) Sensitivity analysis
6) Estimating net present value
5) Estimating economic benefits of reduced flood damages
8) Recommendations
1) Context and project description

38. 38
4) Estimating economic benefits on agriculture
3) Nature of benefits
2) Estimated costs
Outline of presentation
7) Sensitivity analysis
6) Estimating net present value
5) Estimating economic benefits of reduced flood damages
8) Recommendations
1) Context and project description

39. Cost-Benefit Analysis: Advanced Training
Presentation by Dr. Benoit Laplante
Bangkok, Thailand
November 27-28, 2017
Session 2:
Enhancing climate resilience in Thailand through effective
water management and sustainable agriculture