Uncertainty and Sensitivity Test

As mentioned previously, this study is intended to provide first cut estimates of the costs and benefits of the proposed polder system. This allows us to identify polders where the potential net benefits are the highest, which could be prioritized. However, the study is subject to large uncertainties. Especially, the costs considered here do

Fig. 21.8 Sensitivity test using inflation rate 4%, 7%, and 10% showing number of polders that give immediate benefit at return period 2 years (Source: Author’s analysis)

not include the costs for the pumping stations and retention lakes, which could add up to a significant part of project costs. Therefore, for polders with a B/C ratio that only exceeds 1 by a relatively small amount, caution must be exercised. For all polders, if one were to want to move towards implementation, much more detailed studies of both the costs, benefits, and hydraulics systems would be required at the local scale. Nevertheless, the results are useful for opening a dialogue between planners and decision-makers on the potential of the proposed polder system to reduce risk.

We tested the sensitivity of the BCA to the choice of discount rate, by also carrying out the analyses using lower (4%) and higher (10%) discount rates, and examining the number of polders for which the resulting B/C ratio > 1. The results are shown in Fig. 21.8, including a power fit between the discount rates of 4%, 7%, and 10%. As expected, the number of net benefiting polders reduces as the discount rate increases, since most of the costs are incurred early on whilst the benefits accrue over the lifetime of the polder. Nevertheless, even at the higher discount rate, a large number of polders show a B/C ratio >1, indicating that these polders are relatively insensitive to the discount rate used.