3. Current limitations in estimating WEBs
Each of these three WEBs is a legitimate benefit in theory. However, there are serious measurement difficulties, with the availability of Australian-specific data needed to calculated WEBs currently being sub-optimal. So much so that IA recommends that cost-benefit analysis results (BCRs and NPVs) be presented first without WEBs, and then with WEBs, treating WEBs effectively as a sensitivity test.
It is recognised that the calculation of these wider benefits is still in its infancy, both in Australia and internationally. Notwithstanding this, the correct interpretation and accurate calculation of WEBs (using the most suitable data available) can add texture to the decision-making process for certain initiatives. However, in currently estimating WEBs, it is crucial to acknowledge the following key points:
- Only certain initiatives, addressing a specific set of economic fundamentals, will generate WEBs. For example, a project would have to show a significant change in business travel between employment centres in order for agglomeration benefits to be material. This is because agglomeration benefits derive from business-to-business interaction.
- Significant WEBs will only be found in initiatives with strong traditional benefits, since WEBs require high levels of behaviour change (e.g. strong demand for the new asset).
- WEBs may be negative for some initiatives.
- The availability of Australian-specific data needed to calculate WEBs is currently sub-optimal.
Therefore, WEBs should be treated separately to the traditional CBA. It is recommended that practitioners seeking to calculate WEBs consults with Infrastructure Australia before proceeding with the analysis. Any subsequent study should base the justification for inclusion of WEBs on the economic theory and applicability of this to the initiative’s strategic objectives and impacts upon the transport and labour market. The quantitative analysis should use well informed assumptions about the most appropriate, initiative-specific data.
It is bad practice to apply a broad percentage up-lift to the results of the traditional appraisal. This does not provide any additional or meaningful information for consideration in the decision-making process.
The following links provide additional information on WEBs and their calculation to assist those preparing economic appraisals:
- General guidance on wider economic benefits is included at the UK Department of Transport site: http://www.dft.gov.uk/pgr/economics/rdg/webia/
- Specific technical guidance on the calculation of wider economic benefits is provided in the UK Department of Transport document titled, Transport, Wider Economic Benefits and Impacts son GDP, June 2006, and The Wider Impacts Sub – Objective, April 2009, available at the following site: http://www.dft.gov.uk/webtag/webdocuments/doc_index