The role of economics in environmental management

Environmental Science and Pollution Research, 2004

Background, Aim and Scope. The Damage-Function method is an efficient tool recently used in decision-making processes concerning environmental management. [t is based on finding the relation between the origin of an environmental charge, and its impact on human health and the environment. The aim of the present investigation was to assess the positive impacts, also called benefits, of changes in environmental quality, and the economic viability of an industrial project on reduction of PCDD/F emissions. It has been developed with monetary criteria of two worldwide ambits: USA and European-Union countries. Methods. The current study is a continuation of a previous investigation in which Substance Flow Analysis and Control Analysis Techniques were used to identify and to analyze all main flow values of PCDD/Fs inside the system of Tarragona Province (Spain). In the present study, Cost-Benefit Analysis (CBA) has been employed, The benefits derived from a minimization in the incidence of cancer due to a reduction in the emission of PCDD/Fs have been evaluated considering the value of a statistically saved life (VSL). Statistical analysis about uncertainty has also been incorporated. Here, the Monte Carlo simulation technique has been used. Results. It is shown that CBS results depend firstly on the kind of VSL used. In fact, the differences between the decisions as a result of applying monetary criteria in USA and EU can be explained by differences between VSL values. Conclusion and Recommendation. It is concluded that, for prices estimated in Euros, the emission cleaning project in the industrial plant is not feasible under any circumstance. However, although CBA seems to be a good analytical method, the final decision corresponds to the managers, who must weigh up not only the monetary criteria, but factors such as social questions.

Environmental Impact Assessment Review, 1990

The need to marry ecology and economics is the underlying theme of a report by the World Commission on Environmental Development. The present article argues the case for utilizing extended cost-benefit analysis in environmental impact assessment. Environmental assessment requires that all impacts, ecological, economic, and sociological, be integrated. Assessment should be presented in a form that allows a decision maker to rapidly comprehend the net effects of a project or policy. Economic evaluation permits this. It is essential that all significant impacts be ultimately measured in terms of changes in utility and disutility. Considerable progress has been made in extending cost-benefit analysis, such that externalities, including off-site ones, can be measured and incorporated in a net present value or cost-benefit ratio. While the paper argues the case for utilizing cost-benefit analysis, it also discussed some of the important limitations.

1985

Part 1-Benefit-Cost Analysis 1.1 What is benefit-cost analysis? Benefit-cost analysis (BCA) is a technique for evaluating a project or investment by comparing the economic benefits with the economic costs of the activity. Benefit-cost analysis has several objectives. First, BCA can be used to evaluate the economic merit of a project. Second the results from a series of benefit-cost analyses can be used to compare competing projects. BCA can be used to assess business decisions, to examine the worth of public investments, or to assess the wisdom of using natural resources or altering environmental conditions. Ultimately, BCA aims to examine potential actions with the objective of increasing social welfare. Regardless of the aim, all benefit-cost analyses have several properties in common. A BCA begins with a problem to be solved. For example, a community may have the goal of alleviating congestion on roads in an area. Various projects that might solve the particular problem are then identified. As an example, alternative projects to alleviate road congestion in an area might include a new highway, a public bus system, or a light rail system. The costs and benefits of these projects would be identified, calculated, and compared. Decisions are typically not made solely on the basis of BCA, but BCA is useful and sometimes required by law. Without a doubt, results from a BCA can be used to raise the level of public debate surrounding a project.

Environment and Development Economics, 1997

The thrust of the principles enunciated in Arrow et al. is that economic benefits and costs can be a great help in organizing disparate concerns, in identifying issues, and in designing regulatory policies and individual projects with environmental impact. While this true, I must disagree with the authors that 'formal benefit-cost analysis should not be viewed as either necessary or sufficient for designing sensible public policy' (p. 201). At least there can be little doubt that cost-benefit analysis is necessary for sensible policy. I comment below from the perspective of devloping countries.

Ecological Economics, 1996

A fundamental step in integrated environmental assessment (IEA) is the choice of an assessment framework. The usual attempt to develop integrated assessments of different options is to apply a cost-benefit analysis (CBA), which is an important part of the IEA, but at the same time is one of its weakest points. One should note that this paper does not aim at presenting new advances on specific issues of CBA. The present paper has as a main objective to analyse the role of CBA in the IEA framework, in particular: (1) to make explicit the economical, philosophical and mathematical assumptions on which CBA is based; (2) to discuss the main characteristics and consequences of these assumptions; (3) to test the consistency and compatibility of such an axiomatic system. It is thought that this is useful above all for non-economists involved in IEA studies.

2014

Cost Benefit Analysis is one of the most widely used financial tools to select future investment projects in public and private sector. This method is based on comparing costs and benefits in terms of constant prices. While costs are easier to predict and monetize, the benefits should be identified not only in direct relation with the investment, but also widening the sphere of analysis to indirect benefits experienced by the community from the neighbourhood or the whole society. During financial analysis, respectively economic analysis, benefits are taken into account in a different basis. While financial analysis deals with direct revenues generated by the investment project, the economic analysis integrates supplementary social benefits monetized using different methods of estimation. The quality of economic analysis is vital in accepting investment projects because economic rationality should be respected, especially positive value for NPV. The most challenging part of CBA is to...

Journal of Public Affairs, 2015

The goal of this paper is to deliver a concise form of discussion on the use of cost‐benefit analysis (CBA) in environmental policy formulation in the scholarships. There have been several critiques from environmental/legal economists and even from economists who are in favor of the use of CBA. The critiques of CBA can be reduced to one statement: ‘numbers don't tell us everything’. The implication from the critiques of CBA is that these evoke cautiousness or wariness against an economized calculation of CBA in the environment policy. CBA can be a valuable tool when it is carefully restricted from being used in policies such as environment, health, and natural resource policy in which inherent incommensurability exists. Copyright © 2015 John Wiley & Sons, Ltd.

The capital expenditure appraisal process has so far been presented in the framework of a cost benefit analysis where all benefits and costs are expressed in monetary values. However, many projects or programs undertaken by governments produce benefits that may be considered to be highly desirable but whose quantification in monetary terms is difficult if not impossible. Common examples of such projects are the provision of elementary school education, improvements in the provision of health care services, investment in public security and the administration of justice. In such cases, a full cost benefit analysis may not be feasible for each individual project or program but a costeffectiveness analysis (CEA) can be carried out. Such an analysis measures the quantities of benefits generated in terms of the number of units of the items produced, but no attempt is made to convert these into monetary values. This chapter outlines a methodology for conducting cost effectiveness analysis and discusses it usefulness and its limitations. Further extensions of cost effectives are made into topics of cost utility analysis, and the limitations of cost effectiveness.