Cost benefit analysis of resources

Cost Benefit Analysis of
Environmental Resources
Jahangirnagar University

Introduction:
Environmental resources management and protection is now an integral part
of public policies, at local, national and global levels. In all instances, the cost
and benefits of policies and projects must be carefully weighed using a
common monetary measuring rod. The theory of BCA must be understood
along with the assumptions before the analysis can be presented to policy
makers. It should also be noted that there are many techniques for assessing
and evaluating policies and projects that impact the natural resources. Other
methods include environmental impact assessment, scenario analysis, social
impact analysis, risk-effectiveness analysis, and cost-effectiveness analysis.
BCA is a useful tool for policy makers who make decisions on the competing
uses of natural resources.
Cost Benefit Analysis of Environmental Resources

Cost Benefit Analysis:
Cost-benefit analysis (CBA) is a systematic process for identifying, valuing,
and comparing costs and benefits of a project. It is a systematic approach to
estimate the strengths and weaknesses of alternatives (for example in
transactions, activities, functional business requirements or projects
investments); it is used to determine options that provide the best approach
to achieve benefits while preserving savings.
The CBA is also defined as a
systematic process for calculating
and comparing benefits and costs of
a decision, policy or project. cost
benefit analysis (BCA) is a standard
tool for evaluating the economic
analysis or trade-off analysis
investment of development
projects.

The Cost-Benefit Analysis (CBA) Purposes:
Broadly, CBA has two main purposes:
 To determine if an investment/decision is sound (justification/feasibility) –
verifying whether its benefits outweigh the costs, and by how much;
 To provide a basis for comparing projects – which involves comparing the
total expected cost of each option against its total expected benefits.
The Cost-Benefit Analysis (CBA) Process:
The following is a list of steps that comprise a generic cost–benefit analysis.
 Define the goals and objectives of the activities
 List alternative projects/programs.
 List stakeholders.
 Select measurement and measure all cost/benefit elements.
 Predict outcome of cost and benefits over relevant time period.

 Convert all costs and benefits into a common currency.
 Apply discount rate.
 Calculate net present value of project options.
 Perform sensitivity analysis.
 Adopt recommended choice.’
The Cost-Benefit Analysis (CBA) Evaluation:
CBA attempts to measure the positive or negative consequences of a project,
which may include:
a. Effects on users or participants;
b. Effects on non-users or non-participants;
c. Externality effects;
d. Option value or other social benefits.

Limitation of Cost-Benefit Analysis (CBA):
For very large projects with a long-term time horizon, cost-benefit analysis
typically fails to effectively take into account important financial concerns
such as inflation, interest rates, varying cash flows and the present value of
money.
Conclusion:
Cost-Benefit Analysis application of economic valuation is the measurement
of natural resource accounting. Environmental and natural resource
accounting has evolved since the 1970s through efforts by individuals and
organizations in some countries. In the 1980s, The United Nations Statistics
Division, EUROSTAT, OECD, The World Bank, national statistical offices,
and other organizations standardized the framework and methodologies for
environmental and natural resource accounting.

Cost benefit analysis of resources

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