Exercise Module 3b Cost-Benefit-Analysis (CBA) Country, Date, Presenter

Objective The objective of the exercise is to: Learn how an actual Cost-Benefit Analysis is performed Learn how the Climate Expert Cost-Benefit Analysis is different from conventional Cost-Benefit Analysis ToC - Module 3b Exercise

Step 1 Step 2 Step 3 Step 4 Step 5 Identifying measure costs Identifying avoided costs Setting the framework conditions Identifying climate independent benefits Interpreting results ToC - Module 3b Exercise

Step 1 Step 2 Step 3 Step 4 Step 5 Identifying measure costs Identifying avoided costs Setting the framework conditions Identifying climate independent benefits Interpreting results ToC - Module 3b Exercise

Introduction to STEP 1 – Identifying measure costs In STEP 1 of this exercise you will identify the costs (investment costs and operating costs) that the case company has to pay for implementing an adaptation measure or realising an opportunity. Investment costs are one time costs, e.g. for the purchase, transport or delivery and installation of material / equipment Operating costs are additional costs, e.g. electricity, water or labour costs, to keep the adaptation measure effective over the years. These costs will occur on a regular basis. If operating costs are expected to rise or fall within the next 10 years, insert values accordingly. Use the company handout to define the investment and operating costs. If there is no information given, use your experience ToC - Module 3b Exercise

Guidance for Participants – Identifying cost For this task you should Join your consultant group Read the handout and Insert the figures in the Climate Expert Excel Sheet You have 30 min for this task ToC - Module 3b Exercise

Step 1 Step 2 Step 3 Step 4 Step 5 Identifying measure costs Identifying avoided costs Setting the framework conditions Identifying climate independent benefits Interpreting results ToC - Module 3b Exercise

Introduction to STEP 2 – Identifying avoided costs In STEP 2 of this exercise you will identify the costs that the company can avoid by implementing the adaptation measures The future costs avoided through adaptation can be considered benefits for the company Avoided negative impacts on the business can comprise lost revenues due to productivity decrease or production interruption, repair or replacement costs and additional production costs The figures should be given for the baseline climate change scenario. Make sure that you account for increasing future savings if, for example, electricity or water prices are expected to increase in the future. ToC - Module 3b Exercise

Guidance for Participants – Identifying cost, benefits and conditions For this task you should Join your consultant group Identify relevant cost and benefit figures for the measures under consideration; alternatively, come up with informed guesses on measure costs and benefits Insert the figures in the Climate Expert Excel Sheet You have 45 min for this task ToC - Module 3b Exercise

Step 1 Step 2 Step 3 Step 4 Step 5 Identifying measure costs Identifying avoided costs Setting the framework conditions Identifying climate independent benefits Interpreting results ToC - Module 3b Exercise

Introduction to STEP 3 – Setting the framework conditions In STEP 3 of this exercise you will set the framework conditions for the analysis of the adaptation measure and/or opportunity that the case company wants to implement. The impact factors describes how much higher the costs of the severe and drastic climate change scenarios are than the costs resulting from the baseline scenario. It needs to be specified how much of the negative effects can be mitigated by the measure without to forget that the impacts are cumulative Finally it needs to be specified how likely it is that the expected negative effect on the business will occur once a year. ToC - Module 3b Exercise

Guidance for Participants – Setting the framework conditions For this task you should Join your consultant group Read the handout and identify the conditions; where no conditions are given make assumptions Insert the figures in the Climate Expert Excel Sheet You have 30 min for this task ToC - Module 3b Exercise

Step 1 Step 2 Step 3 Step 4 Step 5 Identifying measure costs Identifying avoided costs Setting the framework conditions Identifying climate independent benefits Interpreting results ToC - Module 3b Exercise

Introduction to STEP 4 – Identifying climate independent benefits In STEP 4 of this exercise you will identify the climate independent benefits that the company derives from implementing the adaptation measures Benefits can also be effects realised independently of climate change - Such benefits can be, for example cost savings from more efficient processes additional sales due to productivity increase through more performant equipment Make sure that you account for increasing future savings if, for example, electricity or water prices are expected to increase in the future ToC - Module 3b Exercise

Guidance for Participants – Identifying cost, benefits and conditions For this task you should Join your consultant group Identify relevant cost and benefit figures for the measures under consideration; alternatively, come up with informed guesses on measure costs and benefits Insert the figures in the Climate Expert Excel Sheet You have 15 min for this task ToC - Module 3b Exercise

Step 1 Step 2 Step 3 Step 4 Step 5 Identifying measure costs Identifying avoided costs Setting the framework conditions Identifying climate independent benefits Interpreting results ToC - Module 3b Exercise

Introduction to STEP 5 – Interpreting results In STEP 5 of this exercise you will interpret the results that you have calculated for the adaptation measures that the case company intends to implement and realise A discount rate should be chosen that is a bit below the market interest rate Interpretation of results means that you should decide for each measure individually whether it makes sense in economic terms. All figures of a relevant measure should be positive. It also means that you should compare the results of those figures that make sense economically, especially consider the amount of investment If you have two alternative adaptation measures that address the same impact and negative effects on the business, you should select the one that performs better in economic terms; do not forget the Multi-Criteria Analysis results. Especially for RoI and IRR you should also consider the amount of money invested; especially if a very large amount of investment is required it may be difficult to realise these positive results ToC - Module 3b Exercise

Guidance for Participants – Interpreting results For this task you should Join your consultant group Compare the results that you have computed with the Climate Expert Excel Sheet Discuss in the group which measures seem most relevant for you given the results of the Cost-Benefit Analysis as well as the Multi- Criteria Analysis (module 3a) You have 20 min for this task ToC - Module 3b Exercise

Discussion – Comparing results This exercise is about presenting the results to your peers and discussing how this is relevant for any real climate change adaptation assessment. After presenting the results discuss the following questions: Do you think this approach can serve you derive actual economic figures for adaptation measures and business opportunities? What could be challenges in applying this step to a real company? What is your view on including different climate impacts in the calculation? ToC - Module 3b Exercise

Thank you for your attention! Company Trainer 1 Telephone number E-Mail address Homepage Company Trainer 2 Telephone number E-Mail address Homepage Knowledge partner ToC - Module 3b Exercise