Economic Valuation Methods and Cost-Benefit Analysis

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.