An Economic Impact Assessment (EIA) is undertaken to quantify the direct and flow-on effects that a project is expected to have on an economy. The Project Team can use the results of an EIA to help evaluate the potential impact of the project, measured primarily by contribution to economic activity and employment.
Alongside, or within, a Business Case, or at a later stage of the Infrastructure Investment Lifecycle, the Project Team may wish to undertake an EIA to estimate the impact that Government investment in the project, Program or Precinct is expected to have on the ACT economy. The assessment differs from, and should complement and not replace, the Economic Appraisal. The last section on this page details the differences in purpose, impacts measured and outputs of the Economic Appraisal and EIA.
Purpose of this section
The Project Team should use this section when conducting an EIA. Should the Project Team elect to conduct an EIA, it should consult ICA who will assist with obtaining appropriate expertise and support. The purpose of this guideline is to provide guidance on:
- The high-level objectives of an EIA
- When to use an EIA, and the difference between an EIA and Economic Appraisal
- The methodologies available to conduct an EIA and their respective advantages and drawbacks
- The high-level principles of conducting an EIA
- The types of information an EIA can provide and how to communicate the results of the assessment.
Objectives of Economic Impact Assessment
The primary objective of an EIA is to help understand the economic implications of an investment decision by providing Government with important information on the economic impacts of a project in terms of its direct and indirect effects on economic activity and employment.
The spending and infrastructure investment can generate or attract economic activity and support employment opportunities. These impacts can arise through several mechanisms, some of which are directly visible (such as direct employment), while others are less direct and more difficult to observe (such as the upstream and downstream economic activity generated from the project).
Differences between the Economic Impact Assessment and Economic Appraisal
An EIA supplements the Economic Appraisal required in the Business Case which is the primary tool for investment decision making by Government. The two analyses serve different purposes and measure materially different impacts, as detailed in the table below. However, the two analyses can together provide a more comprehensive picture of the impacts of a project.
Concept | Economic Impact Assessment | Economic Appraisal |
|---|---|---|
Purpose | Addresses how the economy is likely to change as a result of the project. | Addresses whether the community as a whole is better off by proceeding with the project versus the Base Case, and examines net benefits and costs (including consideration of those for which a monetary value cannot be calculated). |
Impacts measured | An EIA quantifies the direct and indirect impacts from the project by capturing the inter-industry relationship between turnover and final demand. It captures backward linkages associate with supply of inputs and forward linkages associated with the consumption spending supported by the associated wages earned. | An Economic Appraisal, through a CBA, captures the net additional economic benefits of the project, including economic, financial and social benefits and costs. The Economic Appraisal required under the Capital Framework also considers benefits of which monetary value cannot be estimated, and the distribution of those benefits across the community. |
Outputs | The results of an EIA are typically presented in terms of income, industry value added to the economy and employment generated. | The results of the Economic Appraisal are presented quantitatively as a BCR in present value terms, which can be compared between options. The results of MCA and distributional analysis are also produced, which can also be compared between options in more qualitative terms. |
More information on the Economic Appraisal can be found in the detailed Guidelines.
Footnotes: