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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

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