Question

Proponents of benefit-cost analysis (BCA) contend that it makes the policy process more rational because it enables governments to select the best policy at the lowest cost. However, others argue that it is ill-suited for evaluating public policy when some of the costs are environmental damage and damage to public health. What are the arguments against using BCA in regulations affecting the environment? How does environmental valuation seek to make the environmental policy and regulation process more rational and potentially enhance the efficacy of BCA as a policy tool?

Answer 1

Arguments relating to Benefit-Cost analysis in regulations affecting environment are that some times the harm caused by an action may not show immediate effects on the environment as a result of which it is not taken in to consideration.For example- A pollutant released from a manufacturing industry which might be later found out after showing its affects on humans.Also, sometimes the environmental damage associated with the development project or any activity which requires the benefit-cost analysis to be done may affect future generations and hence,these impacts needs to be analysed and be considered in the analysis.

Environmental valuation seek to add and address these hidden impacts in the analysis by assessing both the direct and the indirect long-term effects on the environment thereby, increasing the effectiveness of the analysis.