Indirect and Avoided Environmental Consequences in Project Evaluation

The paper focuses on indirect environmental consequences, namely the environmental consequences of the production of project inputs. In addition, we introduce the term 'avoided environmental consequences', i.e. the environmental consequences associated with diversion of production factors from alternative use. The former are always relevant, while the avoided consequences are only relevant in cases involving fully-employed production factors that would otherwise be used in production. The inclusion of indirect and avoided environmental consequences may considerably affect the outcome of traditional project evaluation. In this paper it is suggested how the indirect and avoided environmental consequences may be described using the input-output system in combination with environmental coefficients.