In this paper I address the issue of incorporating environmental sustainability in project appraisal. I extend the results of Barbier, Markandya, and Pearce on ‘operationalizing’ a concept of sustainability into appraisal methods for practical decisionmaking. I generalize their results in two directions. First, I abandon their implicit assumption that benefits and costs of a given project in a given period depend only on the level of activity of the project in the same period. Second, I address the issue of which portfolio of projects to choose. My results show how to modify the net present value criterion for choosing a set of projects in the presence of a sustainability constraint.
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References
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BarbierE BMarkandyaAPearceD W, 1990, “Environmental sustainability and cost–benefit analysis”Environment and Planning A221259–1266
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MarkandyaAPearceD W, 1988b, “Environmental considerations and the choice of the discount rate in developing countries”, WP-3, Environment Department, World Bank, Washington, DC
