Resource allocation in environmental projects under uncertain physical and economic conditions

Abstract

This article advocates the idea for a rationale allocation of resources to reduce the physical and economic uncertainties that dominate the performance of an environmental project through the integration of scientific and economic analyses. Scientific analyses of environmental hazards are hindered by significant uncertainties that arise from poor understanding of the complex interaction of physical, chemical, and biological processes that control these hazards and the limited amount of data that, in most cases, are not error free. Moreover, the existing technological solutions are limited in their efficiency, expensive to implement, and can generate by-products that are difficult to control. From a financial perspective, scientific uncertainties and limitations of the technological solutions are only a subset of the total uncertainties. Changing political, financial, and regulatory conditions constitute other unpredictable components in a project's performance and financial return. The objectives of this article are (1) to propose a methodology that will improve our capabilities to identify and prioritize the dominant scientific and economic indicators in environmental projects and (2) to suggest resource allocation for uncertainty reduction that is based on fully integrated environmental risk assessments.