On a New Approach to Social Evaluations of Environmental Projects

Abstract

Conventional cost-benefit rules typically assume that the alternative to the project under evaluation is 'doing nothing' or 'business as usual'. In this note we contrast this approach to one where the alternative is to provide another environmental good or service. We show that this approach, which draw on methods like Habitat Equivalency Analysis and Resource Equivalency Analysis, imply that all cost and benefit items can be estimated using market prices. This is in sharp contrast to the conventional approach which typically require the use of controversial stated preference techniques to estimate the willingness to pay for non-market goods.

Keywords: cost-benefit analysis, habitat equivalency analysis, non-market goods, resource equivalency analysis, stated preference methods

JEL Classification: D61, H43, Q51, Q57