The incremental cost of protecting the global environment is a measure of the economic burden that would be placed on a country for undertaking its development in a way that does so; it is a recognition that development undertaken with global environmental protection in mind sometimes costs more than the same development pursued with only the national interest in mind.

The Program for Measuring Incremental Costs for the Environment (PRINCE) is a program of technical studies that applies the incremental cost framework to the four focal areas of GEF operations: Biological Diversity, Climate Change, International Waters, and Ozone Depletion. Although incremental costs provide an important input into other GEF operational issues such as project screening and selection, and cost-effectiveness of proposed activities, there are many aspects besides incremental costs that need to be taken into account.

Approach

PRINCE includes three types of activity: methodology development, case studies, and the dissemination of findings. Each methodological study refines procedures for applying the incremental cost framework, each case study applies the methodologies in a real setting, and dissemination helps bring about a shared understanding of GEF operations. The outputs of these activities are made more relevant and operational by the fact that PRINCE work is largely undertaken in partnership or by regional centers of excellence located in developing countries.

In its early phases, there was an international advisory group consisting of staff from the secretariats of both the FCCC and the CBD, and eminent persons bringing the perspectives of developing and developed countries. In addition, the workplan was drawn up with inputs from the three Implementing Agencies of the GEF: UNDP, UNEP and the World Bank. PRINCE work is managed by the Secretariat of the GEF. Now, as PRINCE reorients its work to emphasize dissemination, the advisory group will be reconstituted and reconvened to provide guidance.

In February 1994, the GEF and USAID concluded a cooperative agreement whereby USAID would provide financing for additional activities to supplement on-going PRINCE work. Further financing arrangements with other participating governments of GEF could broaden the scope of PRINCE activities.

The results of PRINCE studies have been made available through many channels: GEF Working Papers, international conferences, briefing sessions for GEF Participants, training programs for UNDP and World Bank staff, and workshops on specialized tasks. Key documents will be made available on this web site after consultation with our collaborators.

Past and Current Activities

In the climate change focal area, methodological development by the Latin American Energy Organization (OLADE), a regional center of excellence for PRINCE work, showed the importance of estimating the full incremental costs incurred by the electric power system as well as the project. OLADE also coordinated case studies by the staff of the power utilities in Colombia and Costa Rica who applied the incremental cost framework to power system expansion planning. In July 1994, the findings of these studies were disseminated at a regional forum organized by OLADE in Quito, Ecuador.

PRINCE has completed two studies on the potential costs associated with adaptation to climate change.

In biodiversity, PRINCE collaborated with the Centro Internacional de Mejoramiento de Maiz y Trigo (CIMMYT) in Mexico, the University of Mexico, local NGOs and indigenous groups to estimate incremental costs of interventions that address the proximate causes of loss of biological diversity in the Sierra de Santa Marta region.

A study coordinated by Wetlands International - Asia Pacific concerning the incremental costs of preserving wetland biodiversity, has finished. Wetlands International and the GEF have published the results.

PRINCE organized and co-sponsored, with the World Bank, a workshop on estimating the country level costs for the phase-out of ozone depleting substances.

The incremental costs of shifting transport development strategies has been studied in a collaboration among researchers from the international institute of Applied Systems Analysis, another from the Asian Institute of Technology, and the GEF Secretariat.

In Africa, through NGOs and university departments, the incremental costs of on and off grid renewable energy options have been studied. Results are being written up.

PRINCE consultants have reviewed the operational experience with incremental cost estimations. This provides several instructive examples of the sensitivities, limitations, and operational use of incremental cost. As a result, twelve "paradigm cases" of incremental cost have been prepared to illustrate good practice.

PRINCE will now help prepare training material for both government counterparts and Implementing Agency staff involved with estimating incremental cost. Estimation of incremental costs involves a series of cost assumptions, so pragmatic negotiations within the incremental cost framework will be assisted by various tests of reasonableness, coherence and consistency.

Selected Reports on Incremental Cost

1. Incremental Costs and Financing Modalities, Document Number GEF/C.2/6/Rev. 2, May 1995.
2. Wetlands International Asia Pacific: Incremental Costs of Wetland Conservation. November 1997.
3. Fankhauser, Samuel: The Potential Costs of Climate Change Adaptation, available May 1995.
4. Latin American Energy Organization (OLADE): The Incremental Costs of Reducing Greenhouse Gas Emissions in Power Generation, Proceedings of a Seminar held at Quito, Ecuador, July, 1994.
5. Ahuja, Dilip: The Incremental Cost of Climate Change Mitigation Projects, GEF Working Paper Number 9, April 1994.