Additionality

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Additionality is the property of an activity being additional. It is a determination of whether an intervention has an effect, when the intervention is compared to a baseline. 'Interventions' can take a variety of forms, but often include economic incentives.[1] For an example of the application of additionality in environmental crediting markets refer to carbon credits.

Additionality may be evaluated ex post, as is often done in the practice of program evaluation. Or it can be done ex ante, as an initial eligibility screen for issuing credits as part of an environmental or other public goods market. For ex ante applications, additionality is evaluated for proposed activities. A proposed activity is additional if the recognized interventions are deemed to be causing the activity to take place. The occurrence of additionality is determined by assessing whether a proposed activity is distinct from its baseline. A baseline is a prediction of the quantified amount of an input to or output from an activity resulting from the expected future behavior of the actors proposing, and affected by, the proposed activity in the absence of one or more policy interventions, holding all other factors constant (ceteris paribus).[2]

Other working definitions of the term are available here.

Economic definition[]

Net positive difference that results from economic development intervention. The extent to which an activity (and associated outputs, outcomes and impacts) is larger in scale, at a higher quality, takes place more quickly, takes place at a different location, or takes place at all as a result of intervention. Additionality measures the net result, taking account of deadweight, leakage, displacement, substitution and economic multipliers.[3]

Additionality is calculated by the following formula:[4]

A = Iin − Irc

where A is the additionality, Iin is the impact of the intervention, and Irc is the impact of a reference case.

One of the most important application of Additionality calculation relates to loans, specifically, government guaranteed loan, for calculating Loan Adjusted Additionality and Loan Baseline Additionality[5]

Problems[]

Additionality becomes problematic when the parties claim that their behavior is being changed due to recognized intervention (e.g., because of the economic incentive provided by earning carbon offset credits), when in fact the intervention is having no effect on their behavior because other factors are dominant (e.g., earning a profit from an activity even without carbon credits). The proposed project is therefore not truly additional, since it would have been implemented without the intervention (e.g., in the form of the carbon credit price signal). This without intervention scenario is often referred to as "business as usual").

See also[]

References[]

  1. ^ Gillenwater, M. "What is Additionality? Part 1: A long standing problem" (PDF). Retrieved 10 December 2014.
  2. ^ Gillenwater, M. "What Is Additionality? Part 2: A framework for a more precise definitions and standardized approaches" (PDF). Archived from the original (PDF) on 21 August 2014. Retrieved 10 December 2014.
  3. ^ Appraisal & Evaluation Team. "Additionality & Economic Impact Assessment Guidance Note: A Summary Guide to Assessing the Additional Benefit, or Additionality, of an Economic Development Project or Programme". Archived from the original on 5 March 2016. Retrieved 13 August 2019.
  4. ^ "Additionality Guide: A Standard Approach to Assessing the Additional Impact of Projects" (PDF). English Partnerships. Retrieved 21 July 2012.
  5. ^ H. Rubin, Tzameret; Ben-Aharon, Nir (26 February 2021). "Additionality of government guaranteed loans for SMEs in Israel". Journal of Economics and Finance. 45 (3): 504–528. doi:10.1007/s12197-021-09538-8. ISSN 1938-9744.

External links[]

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