There is a widespread concern that adverse environmental effects of economic activities will seriously affect both the present and future welfare of people in less developed countries, and that the present project appraisal practices do not adequately address this issue. This report attempts to elaborate on this concern, as expressed through the concept of sustainable development. It surveys and discusses methods on how to include the idea of sustainable development in project appraisal with the help of cost-benefit analysis methodology. This is done both at a general methodological level, and in a case study of a semi-hypothetical fuelwood project in Malawi. The project appraisal practices of three development organisations (the World Bank, NORAD and the Asian Development bank) are also reviewed.

Odd-Helge Fjeldstad

Research Professor, Coordinator: Tax and Public Finance