A new model to evaluate land use development project

Zhang Haochen

Abstract：Traditionally， most land use projects do not consider the impact of environmental pollution. However， with the worsening of the natural environment， environmental cost cannot be ignored. Therefore， in this essay we use various accounting methods of different types of pollution costs in past materials， together with our modifications， to obtain an innovative environmental cost accounting method. Meanwhile， based on the above research results， we analyze the impact of the model on the project planners and managers.

Key words：environment pollution; economic loss; cost-benefit analysis

1? ? Introduction

Environmental problems have undoubtedly become people’s most concern in the world. The continuous development of economy has brought irreversible impact on the environment， endangering the earth on which we rely for survival. Therefore， the cost assessment of land use and development projects should not only consider the production cost and construction cost， but also consider the economic losses caused by environmental pollution in the process of construction and use. Assessing the cost-effectiveness of a land use development project is bound to calculate its environmental costs.

2? ? Preparation of the model

2.1? Assumptions

（1）On the basis of InVEST model， we divide pollution generated by land use projects into air pollution， water pollution， noise pollution and garbage pollution.

（2）We divide the environmental cost into the direct economic loss caused by environmental pollution and the cost caused by the developer’s pollution control. For convenience， we assume that the reduced economic loss is proportional to the governance cost.

2.2? Notations

3? ? Model

3.1? Weight calculation based on analytic hierarchy process

We hope to give the weight of loss reduction cost of different projects to different pollution by Analytic Hierarchy Process. Because we study the weight ratio under different project conditions， we divide different projects into small-scale community projects， medium-sized projects and large-scale national projects. And we divide decision-making into two levels， target level and criterion level. The target level is attention to environmental cost， and the criterion level is separated into four different kinds of pollution. After determining the hierarchy of the Analytic Hierarchy Process， we compare the relative importance of the four factors at the criteria level according to the definition of importance.

Definition of importance is as shown in table 2.

Based on the above definition of importance， we conducted a data survey according to different scales of the project， and strictly determined the judgment matrices under three different scales. The judgment matrices for small community projects are A1， for medium-sized projects are A2， and for large national projects are A3.

Then we can get the weight vector by normalizing the judgment matrix. Firstly divide each column element of matrix A1， A2 and A3 by the sum of each column element. Then there are normalized matrices a1， a2 and a3， which are respectively：

We sum each matrix by rows and get the weight vectors B， C and D respectively. Then they are：

B=（0.096 0? ?0.161 1? ?0.271 1? ?0.465 8）

C=（0.115 2? ?0.136 1? ?0.468 7? ?0.280 0）

D=（0.475 8? ?0.288 4? ?0.081 3? ?0.154 4）

After getting the weight vectors， we also need to check the consistency of the judgment matrix. We quickly get the maximum eigenvalues of A1， A2 and A3 matrices， which are represented by b， c and d respectively， that is：

b=4.031 0

c=4.031 0

d=4.021 1

Then we use T. L Saaty consistency index， the C.I. of the three matrices are：

C.I.1=0.010 1

C.I.2=0.010 3

C.I.3=0.007 0

According to Saaty random consistency index table， we know that R.I. = 0.89. Therefore， we can calculate the consistency ratio C.R. by the ratio of C.I. to R.I.

C.R.1=0.011 6<0.1

C.R.2=0.011 6<0.1

C.R.3=0.007 9<0.1

Thus， we can know that the three judgment matrices pass the consistency test. And we can apply the three weight vectors obtained previously to the model that will be built later.

3.2? Environment cost calculation

3.2.1? Overview

Based on the assumption that the environmental cost including the direct economic loss caused by environmental pollution and the cost caused by the developer’s pollution control， we have：

Where ω represents the proportion of treatment costs allocated to different types of pollution， and apparently ωa + ωw + ωn + ωg =1.

3.2.2? Air pollution cost based on Human Capital Approach

（1）Air pollution is a common pollution in the process of land use development projects’ construction and use. Therefore， we choose the three typical diseases above as the research objects. According to the Human Capital Approach， we have：

Where M is the total population covered by a land use development project， P is the human capital which is also equals to per capita GDP， Ti is the average time lost to labor caused by the disease i， Li is the incidence of disease i when the project finishes， Li0 is the incidence of disease i when the project starts， Yi is the average treatment cost of the disease i， Hi is the average time in which a patient’s family member is absent from work to take care of the patient.

（2）Assuming that the reduced economic loss is proportional to the governance cost， so we have：

Where βa is the economic loss of air pollution that can be reduced by investing 1 unit of treatment cost.

3.2.3? Water pollution cost based on opportunity cost approach

（1）Various industrial waste water will be discharged into nearby rivers and eventually into the ocean with the development of the project. We attempt to estimate the environmental cost of water pollution approximately by using the reduction in freshwater usable from water pollution. The formula is as follows：

Among them， Pw is the price of tap water at the site of the project and Vw is the total amount of sewage discharged from the project.

（2）Likewise we have the following formula：

Where βw is the economic loss of water pollution that can be reduced by investing 1 unit of treatment cost.

3.2.4? ? Noise pollution cost based on asset value approach

（1）Some land use development projects will generate a lot of noise during construction or operation， which directly affects the price of surrounding real estate. According to the WHO， the normal daytime noise level is under 70 dB， and more than 70 dB will affect people’s living experience. So according to the Asset Value Method， we have：

Ln=EPH（NSDI）（dB（A）-70）

Where E is the number of buildings covered by a land use development project， PH is the average price of a house， NSDI is noise sensitivity depreciation index which means the sensitivity of the depreciation of a house to noise， dB（A） is dB of actual noise.

（2）Similarly， at every junction we have：

Where βn is the economic loss of noise pollution that can be reduced by investing 1 unit of treatment cost.

3.2.5? Garbage pollution cost based on shadow project approach

（1）As long as the construction projects， which pollution cannot be avoided is garbage pollution， so the environmental cost of garbage dump cannot be easily ignored. We use the cost of waste treatment to approximate the environmental cost caused by waste dump according to the Shadow Project Approach. The formula is as follows：

Among them， Pv is the virtual unit treatment cost， Vv is the pollutant discharge; PR is the actual unit treatment cost， VR is the pollutant treatment amount.

（2）Like before， we have the following formula：

Where βg is the economic loss of garbage pollution that can be reduced by investing 1 unit of treatment cost.

4? ? Influences

First of all， in the stage of project planning， planners should take environmental costs into account. Our model has given a more concise method for environmental cost accounting. In real life， the environmental pollution caused by various projects is becoming more and more serious， which requires managers of enterprises to consider environmental issues more.

Secondly， project planners should pay attention to the scale of development projects. The difference of project scale directly affects the importance of different types of pollution reduction costs （ω）， thus affecting the environmental cost of the project.

Finally， there are some variables that change with time in our cost model， and some factors that change with the geographical environment. This requires the planners of enterprises to take them into account when calculating environmental costs， and ultimately get the closest environmental costs to reality.

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