Cost-Benefit Analysis and the Environment
Further Developments and Policy Use
This book explores recent developments in environmental cost-benefit analysis (CBA).
This is defined as the application of CBA to projects or policies that have the deliberate
aim of environmental improvement or are actions that affect, in some way, the natural
environment as an indirect consequence. It builds on the previous OECD book by David
Pearce et al. (2006), which took as its starting point that a number of developments
in CBA, taken together, altered the way in which many economists would argue CBA should
be carried out and that this was particularly so in the context of policies and projects
with significant environmental impacts.
It is a primary objective of the current book not only to assess more recent advances
in CBA theory but also to identify how specific developments illustrate key thematic
narratives with implications for practical use of environmental CBA in policy formulation
and appraisal of investment projects.
Perhaps the most significant development is the contribution of climate economics
in its response to the challenge of appraising policy actions to mitigate (or adapt
to) climate change. Work in this area has increased the focus on how to value costs
and benefits that occur far into the future, particularly by showing how conventional
procedures for establishing the social discount rate become highly problematic in
this intergenerational context and what new approaches might be needed. The contribution
of climate economics has also entailed thinking further about uncertainty in CBA,
especially where uncertain outcomes might be associated with large (and adverse) impacts.
Published on June 25, 2018Also available in: French