Time to get over cost-benefit analysis

Photo credit:   Bill Dickenson

September 4, 2014 // By: Chris Williams

How government decisions about the environment are made could be about to take a turn for the better.

Don’t worry if you haven’t heard of the UK National Ecosystem Assessment (UKNEA); it’s a colossal environmental analysis report published a few years ago for the government and doesn’t make for light reading. But as the first official assessment of what the UK environment is worth to our society as well as our economy, it represents a significant milestone in the road to a more rational approach to how we value resources.

A major follow-up report, released last month, took this even further – acknowledging that “The natural world and its ecosystems are important to our wellbeing and economic prosperity…Yet they are consistently undervalued in conventional economic analysis and decision-making”

The analysis offers some meaty recommendations for how the government can better integrate environmental and well-being outcomes into policy design, project appraisals and the way it communicates about the environment.

I’m excited these ideas are making headway. Over the past two years I’ve been helping marine conservation NGOs around the country get to grips with economic appraisal. The aim is to make it easier for front line campaigners to identify and challenge misguided economic arguments for putting short-term profits before long term social, environmental and economic gain.

One of our key focuses has been the need for policy-makers to end their reliance on limited monetary appraisal tools, like cost-benefit analysis. Clearly, money is not the only metric that matters – we need to look at decision-making from a point of view that reflects reality, with all its complexities, power asymmetries and diversity of values.

Plenty of alternative tools already exist that can help us do this. Multi-criteria analysis (MCA) for instance, is much better at showing how the effects of a decision will play out for different people and groups. It can help lay bare competing interests and build consensus around the ‘most preferred’ and ‘least preferred’ policy options for everyone involved.

Last month’s UKNEA report reinforced the call for better appraisal techniques. It also highlighted the importance of factoring in cultural ecosystem services – the material and non-material ways in which nature benefits human wellbeing. Until 2013 these were not factored into UK government decisions whatsoever.

A further reccomendation of the report is the ‘Balance Sheet Approach’ – a means of collating, analysing and presenting data and evidence within the policy process. The approach works in three parts:

  1. Those decisions that can be dealt with existing mainstream tools, such as Cost Benefit Analysis, Environmental Impact Analysis and Natural Capital Accounting
  2. Looking at local impacts in more detail, including the impacts on social capital
  3. Considering trade-offs between different stakeholders and options (this is where tools like MCA come in).

We need new tools and approaches for a new economy, and the new UKNEA report makes that point very clearly. Traditional economic analysis doesn’t deal with the winners and losers of policy decisions very well, nor does it deal with values which we share with others, as it simplifies human behavior to fit idealised models.

It’s time for vested interests to stop hiding behind economic jargon in technical appendices. Let’s keep the momentum building for decision making that serves people and planet as well as profit.


Environment, Fisheries, Transport & Infrastructure, Democracy & Participation

Time to get over cost-benefit analysis

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