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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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