Using Decision Analysis For Environmental Decisions

1422 words - 6 pages

A challenge of using decision analysis procedures to make environmental decisions is that they tend to oversimplify a complex problem. The project’s or problem’s impact on the environment doesn’t just produce an economic impact but also a political and social impact. Environmental projects affect a large population of people, “stakeholders” and the environment itself, which need to be taken into consideration when making a decision.
Cost Benefit Analysis
Cost benefit analysis (CBA) has frequently been used in the field of environmental decision making. It is necessary for environmental analysis to evolve and become more sophisticated, due to the challenges presented by environmental decisions. When using cost benefit analysis, benefits are defined as an “increase in human well being” and costs are defined as a “reduction in human well being.” The benefits or willingness to pay for benefits must be aggregated across multiple social groups, otherwise known as society. Willingness to pay and a willingness to accept compensation must also be taken into consideration as well as a defined timeline, which takes into consideration when the cost and benefits will occur as well as the future value of money.
In order for the project to be accepted the social benefits to the group must outweigh the social costs to the group. CBA takes into consideration socioeconomic status of the individuals of the group and allocates a higher weight to benefits that affect those of a lower socioeconomic status.
In order for a CBA to be conducted it is necessary to know what policy or project is being assessed and what the possible alternatives are. In order for the project to be considered acceptable the present value of benefits must exceed the present value of the costs. The cost factor of projects must be given special consideration in CBA because the cost of projects has a tendency to be understated. It is important to conduct a sensitivity analysis in order to show the changes in benefit if costs are increased or decreased by a certain amount.1
Cost benefit analysis requires that there is a defined bottom line or something with which all variables can be measured against. Gain or loss of money is the most commonly used source of measurement. 1 Cost benefit analysis brings many interesting factors into consideration in analyzing a project. However, it seems to be a process which may work better in theory then in reality. The amount of consideration it puts on placing a monetary value on impact to stakeholders is subjective. The positive or negatives costs or benefits of the environment projects are extremely difficult to monetize.
Decision Analysis Approach
A benefit of the Decision analysis approach is that it allows stakeholders to create a clear distinction between what they know and what they want. Decision analysis in this example is using the Bayesian definition of probability which allows the decision maker to treat uncertainty as...

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