Integrating the valuation of environmental effects in cost-benefit-analysis. A review of public guidelines

Abstract

Cost-benefit analysis (CBA) is an important appraisal method in the context of public decision-making and planning. This paper systematically reviews 23 public CBA guidelines regarding the valuation of water and air pollution, greenhouse gas emissions, noise and effects on biodiversity and ecosystem quality. The results show that the extent to which environmental effects are integrated in the documents varies widely. Overall, the use of default values is the most preferred approach, as it allows monetary values to be obtained without complex primary valuation methods. However, the origin and scientific reasoning behind the values are often not made transparent, as highlighted in the present study. Challenges with quantification and monetarization of environmental outcomes can lead to an exclusion of these effects, as is for instance the case for biodiversity impacts, where only 6 out of 23 guidelines propose valuation procedures. Since the goal of a CBA is to capture all social costs and benefits, and the results have a direct impact on public planning decisions and policy-making, many CBA guidelines should be revised to better reflect recent developments in the field of environmental evaluation.