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Accounting for Nonmarket Impacts in a Benefit-Cost Analysis of Underground Coal Mining in New South Wales, Australia

Published online by Cambridge University Press:  19 January 2015

Rob Gillespie  and
Marit E. Kragt
Rob Gillespie
Affiliation:
Gillespie Economics
Marit E. Kragt
Affiliation:
University of Western Australia
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Abstract

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Strategic inquiries into coal mining by Australian Governments advocate increased use of comprehensive benefit cost analyses and nonmarket valuation studies when assessing individual project proposals. The study reported in this paper addresses these Government concerns, by integrating results of a choice experiment into a benefit cost analysis undertaken for a Colliery in the Southern Coalfield of New South Wales, Australia. Results of the study were used to aid the State government in evaluating proposals for continued underground coal mining. We show that impacts of mine subsidence on streams, swamps, and Aboriginal sites negatively affect community wellbeing. Social welfare increases with the length of time that the mine provides direct employment. We demonstrate how implicit price estimates from the choice experiment can be incorporated into a benefit cost analysis of continued mining. Benefit cost analyses were carried out for a range of policy scenarios—including policies that would restrict mining activities at the Colliery and protect environmental and cultural features in the Southern Coalfield. Notwithstanding the environmental impacts generated by mining operations, continued mining is shown to be a more economically efficient course of action.

Keywords

benefit cost analysiscoal miningchoice experimentsmining externalitiesnatural resource managementnonmarket valuation
Type
Article
Information
Journal of Benefit-Cost Analysis , Volume 3 , Issue 2 , 08 May 2012 , pp. 1 - 29
Copyright
Copyright © Society for Benefit-Cost Analysis 2012

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