Environmental cost benefit analysis example

#Environmental cost benefit analysis example how to#

Whether the life is a plant, animal, or human, this is one of the most difficult tasks in environmental cost and benefit analysis. In some cases, the accountant is asked to place a value on a life.

#Environmental cost benefit analysis example how to#

One of the most difficult concepts in environmental economics is how to put value on intangible aspects of the project. The focus of an assessment of environmental impacts focuses on the external effects of the options, as this will affect local communities (Evaluation Unit for DG Regional Policy European Commission, 1997). A choice of valuation and validation must be chosen, as well as an appropriate discount rate. Next, an assessment of the internal and external effects of exercising each of those options must be outlined. To conduct an environmental cost benefit analysis, the project must first be defined and the options identified. The typical environmental impact of a project has an effect on Local air quality, water quality, climate change, groundwater quality, biodiversity, the landscape, and technological risks (Evaluation Unit for DG Regional Policy European Commission, 1997). Using the private discount instead of a social discount can result in bias in the analysis (Simon, 2014). In environmental economics, social discounting is used to examine the future effects of the costs and benefits on society as a whole.

In traditional accounting, private discounting is used to express the discount to an individual firm. In traditional accounting cost benefit analysis, discounting refers to the costs and benefits that will occur in different time periods from the present.

For those that consider the intangible benefits, there is no price too high to save the environment in the area of the spill. For those that only consider the tangible aspects of the cost benefit analysis, losing a little wildlife is not as Significant as having to pay out billions of dollars in cleanup costs.

This point is demonstrated easily when one considers the case of an oil spill or other manmade disaster. Those that consider only the tangible costs almost always consider the price too high for the benefits that one receives, especially if they will be the one to pay. For others, the costs play a key role in the decision-making process. Some consider it impossible to place a value on the environment. 'Cost Benefit Analysis And Environmental Economics'Р”Р„lmost everyone agrees that taking care of the environment has a long-term benefit.