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 Analyse whether some of the relevant adaptation measures make sense in economic terms for the case company ToC - Module 3b Exercise

Identifying measure costs Identifying benefits (Scenario II) Step 1 Step 2.1 Step 2.2 Step 3 Identifying measure costs Identifying benefits (Scenario I) Identifying benefits (Scenario II) Interpreting results ToC - Module 3b Exercise

Identifying measure costs Identifying benefits (Scenario II) Step 1 Step 2.1 Step 2.2 Step 3 Identifying measure costs Identifying benefits (Scenario I) Identifying benefits (Scenario II) 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 or operating costs) that the case company has to bear from implementing an adaptation measure or realising an opportunity. Investment costs are one time costs (they occur only in year 1) such as for the purchasing of material, transport or delivery, and installation of equipment. Operating costs arise for operating and maintaining the new equipment (e.g. electricity, water, or labour costs); these costs occur every year. 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 costs and the operating costs. Also use your experience! ToC - Module 3b Exercise

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

Identifying measure costs Identifying benefits (Scenario II) Step 1 Step 2.1 Step 2.2 Step 3 Identifying measure costs Identifying benefits (Scenario I) Identifying benefits (Scenario II) Interpreting results ToC - Module 3b Exercise

Introduction to STEP 2.1 – Identifying benefits (Scenario I) In STEP 2.1 of this exercise you will identify the benefits that the company derives from implementing the adaptation measures under Scenario I: “Medium climate change“ Step I: Benefits Benefits can be 1) avoided costs (as the expected negative effect does not affect the company due to implementation of the adaptation measure) Benefits can be 2) effects realised independently of climate change, e.g. cost savings from more efficient processes or additional sales from new products 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

Introduction to STEP 2.1 – Identifying benefits (Scenario I) Step II: Benefits, weighted by probability Specify how likely it is that the expected negative effect on the business will occur Step III: Benefits, weighted by probability and effectiveness of the adaptation measure Specify how much of the negative effects can be mitigated by the measure 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 benefits of adaptation for Scenario I; 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

Identifying measure costs Step 1 Step 2.1 Step 2.2 Step 3 Identifying measure costs Identifying benefits (Scenario I) Identifying benefits (Scenario II) Interpreting results ToC - Module 3b Exercise

Introduction to STEP 2.2 – Identifying benefits (Scenario II) In STEP 2.2 of this exercise you will identify the benefits that the company derives from implementing the adaptation measures under Scenario II: “Strong climate change“ Flip open Scenario II for each adaptation measure by clicking on the small “+” on the outer left frame of the Excel table (lines 40, 77, 114, 151, 188) Repeat what you did in step 2.1 – now for Scenario II (strong climate change) However, please add only benefits that are additional to Scenario I (e.g. the benefits of avoiding costs caused by one super storm every 8 years). The likelihood and effectiveness should also be assessed only for the additional effects of Scenario II over Scenario I. Scenarios I + II will then be accumulated automatically in columns X-Z. 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 benefits of adaptation for Scenario II; alternatively, come up with informed guesses on measure costs and benefits Insert the figures in the Climate Expert Excel Sheet You have 30 min for this task ToC - Module 3b Exercise

Identifying measure costs Identifying benefits (Scenario II) Step 1 Step 2.1 Step 2.2 Step 3 Identifying measure costs Identifying benefits (Scenario I) Identifying benefits (Scenario II) Interpreting results ToC - Module 3b Exercise

Introduction to STEP 3 – Interpreting results In STEP 3 of this exercise you will interpret the results that you have calculated for the adaptation measures and opportunities 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 considering 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; don´t forget the Multi-Criteria Analysis results. Especially for RoI and IRR you should also consider the amount of money investment; 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 Select those notecards with the measure that you recommend for implementation 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