Economic Valuation Methods and Cost-Benefit Analysis

Course content

Cost-Benefit Analysis (CBA) provides a framework for analysing the desirability of new policies and projects in welfare economic terms, as well as assessing tradeoffs made in decision making at all levels (individuals, companies, organisations, societies). The course will give a detailed account of the CBA methodology focusing on environmental policies, projects and decision-making. It will mainly take the societal perspective, ideally aiming for a socially optimal supply of environmental goods and services and a sustainable use of resources.     

A particular challenge for environmental decision-making relates to tradeoffs involving non-market goods and services. The CBA framework requires inclusion of all policy and project impacts, on market goods as well as on non-market goods. Economic Valuation Methods serve as tools to assess the benefits and costs for impacts on non-marketed goods and services in monetary terms, thus enabling inclusion in CBA. The course will therefore also give a detailed account of the different available Economic Valuation Methods, focusing on the pros and cons of each of these in relation to practical applications.  

Students will get hands-on experience with conducting economic valuation of non-market environmental goods as well as conducting CBA in a practical case involving environmental decision-making.

The core components of the course are:
- Utility, preferences and welfare measures
- Total Economic Value
- Cost-Benefit Analysis
- Standard conversion factor and tax dead-weight loss
- Discounting and risk
- Revealed preference methods including Travel Cost Methods and Hedonic Pricing Methods
- Stated preference methods including Contingent Valuation and Choice Modelling
- Benefit transfer methods
- Principles for valuing human life and health
- Social cost of carbon
- Relevant case studies to illustrate the application of economic valuation methods and CBA in practice.


MSc Programme in Agricultural Economics
MSc Programme in Environmental and Natural Resource Economics
MSc Programme in Forest and Nature Management

Learning outcome

The central themes of the course are the methodologies and techniques applied in economic valuation and cost-benefit analyses and the underlying economic theory. Economic valuation and cost-benefit analysis are being increasingly applied as support for environmental policy decisions, often in a sustainability context. These analytical tools are also often applied in the fields of health, transportation and marketing. The skills and competencies acquired in this course are relevant for employment in private companies, public administrations, research, consultancies and non-governmental organisations.

Having successfully completed the course the participant is expected to be able to:

- Explain the welfare economic principles underlying economic valuation methods and cost-benefit analysis
- Reflect on the validity and limitations of welfare economic theory in political and ethical contexts
- Describe the different economic valuation methods and the analytical approaches to cost-benefit analysis
- Reflect on the relevance and limitations of valuation methods and cost-benefit analysis for sustainability assessments and in relation to various environmental goods and services, human life, etc.

- Identify relevant approaches to economic valuation studies and cost-benefit analyses in specific analytical settings
- Carry out economic valuation and cost-benefit analyses using appropriate statistical and quantitative techniques involving handling and evaluating digital data and analysing it using relevant software solutions
- Evaluate the validity of the quantitative results obtained in valuation studies and cost-benefit analyses.

- Explain the relevance and limitations of economic valuation methods and cost-benefit analysis in different policy settings
- Discuss scientific and political disagreements in relation to economic valuation and cost-benefit analysis.

Teaching is in the form of lectures and exercises, theoretical as well as practical (computer laboratory). Lectures present the essential elements of the curriculum. In the exercises the participants will have the opportunity to apply the methodologies and techniques introduced and to analyse environmental policy problems. Students are expected to participate actively, e.g. in class discussions, group work and exercises.

See Absalon for the actual list of course literature.

Examples of course literature that has previously been used are:
- Bateman, Ian J. et al.: Economic Valuation with Stated Preference Techniques: A Manual, Edward Elgar.
- Atkinson, G., Braathen, N. A., Groom, B., and Mourato S.: Cost-benefit analysis and the environment: Further developments and policy use, OECD 
- Freeman, A. M., Herriges, J. A., and Kling, C. L.: The Measurement of Environmental and Resource Values - Theory and methods, Resources for the Future.

It is highly recommended to have taken the BSc course in Environmental and Natural Resource Economics (NIFB14004U) or similar courses.

Furthermore, it is recommended that students have acquired basic competences in micro economics (e.g. LOJB10259 or similar courses) as well as econometrics (e.g. LOJK10272 or similar courses)

Academic qualifications equivalent to a BSc degree is recommended.

Continuous feedback during the course of the semester
Feedback by final exam (In addition to the grade)
Peer feedback (Students give each other feedback)

Digital quizzes combined with peer feedback

7,5 ECTS
Type of assessment
Oral examination, 20 minutes
Type of assessment details
The exam will take approximately 40 minutes per student. First, an exam question is drawn randomly from a pool of questions. The student will then have 20 minutes alone with all aids available to prepare an answer to the exam question. The student will then present his/her answer to the examinators for about 8-10 minutes and the examinators will ask additional questions for another 10-12 minutes. After that, a grade is given based on the oral exam.
Exam registration requirements

Students have to hand in a small report summarising results from a series of exercises in the last half of the course where they work on a specific case study. The report can be done as group work (maximum 4 students per group). This report has to be approved for students to take the final exam.

All aids allowed

Computers/tablets are allowed, but any form of online access is strictly prohibited. Failure to comply with this will be considered cheating at the exam. 

Marking scale
7-point grading scale
Censorship form
No external censorship
One internal examiner

Same as ordinary exam. The same exam registration requirement as for the ordinary exam also applies to the re-exam. Students have to hand in a small report summarising results from a series of exercises in the last half of the course where they work on a specific case study. These exercises will be available in Absalon throughout the period between the end of the course and the time of the re-exam. The report has to be handed in no later than three weeks before the re-exam. The report can be done as group work (maximum 4 students per group). This report has to be approved for students to take the re-exam.

Criteria for exam assessment

The assessment will be based on the student's ability to show in the oral exam that the learning outcomes described above have been acheived.

Single subject courses (day)

  • Category
  • Hours
  • Lectures
  • 42
  • Preparation
  • 132
  • Theory exercises
  • 14
  • Practical exercises
  • 17
  • Exam
  • 1
  • English
  • 206


Course number
7,5 ECTS
Programme level
Full Degree Master

1 block

Block 3
No limits
The number of seats may be reduced in the late registration period
Study Board of Natural Resources, Environment and Animal Science
Contracting department
  • Department of Food and Resource Economics
Contracting faculty
  • Faculty of Science
Course Coordinator
  • Søren Bøye Olsen   (4-7b776a7748716e7a7736737d366c73)

Professor Søren Bøye Olsen,
researchers from the Department of Food and Resource Economics,
and a few guest lecturers

Saved on the 28-02-2023

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