Benefit-Cost Analysis

The prohibition of benefit-cost analysis for environmental policies is fallacious because of the benefits and the effectiveness of the method. Benefit-cost analysis is critical to decision-making as it analyzes the impact of a direction at all levels, from the producers to consumers. It bases on the concept that an individual’s preference for a product or service depends on their motivation to pay for the opportunity. It is applicable in environmental issues for risk reduction and quality improvement. It can be helpful with cost-effectiveness analysis to analyze the non-market values to create the best policies comprehensively. The prohibition of benefit-cost analysis for environmental policies is illogical as the benefit-cost analysis is essential for policy creation, analysis, and improvement.


Economic Efficiency

The use of benefit-cost analysis is economically efficient in various ways. It creates accountability through transparency which reduces the costs of following up on unclear issues. It covers all the aspects of the economic model. It is essential to identify uncertainties and gaps through a reliable data collection system (Coplan, 2018). Therefore, it is straightforward and generates a more understandable economic model of the impact of critical environmental policies if implemented. It enables policymakers to accrue all the benefits together for the producers and the consumers.


The primary issue in the utilization of benefit-cost analysis is its assumptions. The method assumes that individuals’ social status represents their well-being with their economic challenges and their value from products and services. Therefore, its central concept is individuals’ preferences, for example, if they are will use a power-saving light bulb or not depending on their social status (Graham et al., 2019). The benefit-cost analysis does not utilize enough essential factors to make concrete decisions, as preference is not efficient independently. However, despite the above assumptions, benefit-cost analysis is a vital tool for measuring economic value. Measuring economic value is critical in creating environmental policies. It is because of the measurement of individuals’ willingness to incur the costs of minimizing environmental damage to reduce morbidity and economic risks. Therefore, social well-being is a critical element in the benefit-cost analysis as it determines the various economic costs and benefits.

Use of Benefit-Cost Analysis

The use of benefit-cost analysis is advisable because of its benefits. However, there is a need to incorporate more concrete assumptions. The benefit-cost analysis is essential to measure opportunity cost, consumers’ willingness to pay for a product or service, identification of non-quantifiable or non-monetizable factors, robust conclusions, and risk-bearing costs (Keohane & Olmstead, 2016). It is essential to measure the welfare changes with the implementation of a policy, ecological responses, and pollution exposure relationship.


Despite the arguments against benefit-cost analysis, it is essential to implement the method with others for efficiency. It shows that the benefit-cost analysis may not be efficient independently but needs the incorporation of other methods. It is beneficial as it justifies the environmental impact of a policy through income distribution. Therefore, it shows how a policy impacts the economic model involving producers and consumers. For example, a policy may be beneficial to the environment. Still, it impacts the consumers as producers tend to lay the costs to continue operations and sustain their profits. However, the prohibition policies against benefit-cost analysis support environmental protection over the economic benefits or disadvantages.


Coplan, K. S. (2018). The missing element of environmental cost-benefit analysis: compensation for the loss of regulatory benefits. Elisabeth Haub School of Law at Pace University30(1), 281-310.

Graham, J. D., Wiener, J. B., & Robinson, L. A. (2019). Co‐Benefits, Countervailing Risks, and Cost‐Benefit Analysis. Risk Assessment, Economic Evaluation, and Decisions Workshop1(1), 1-38.

Keohane, N. O., & Olmstead, S. M. (2016). Markets and the environment (2nd ed.). Island Press.

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