ABSTRACT
Cost-Benefit Analysis (CBA) is used as a tool for policy and project analysis throughout the world. Attempts have been made to incorporate the environmental impacts of project/policies within CBA, in order to improve the quality of government and agency decision-making. Many technical problems persist, however, in applying CBA to environmental issues. In this chapter, we discuss the welfare economics foundations of CBA; go through the stages of a ‘typical’ CBA; review attempts at applying CBA to climate change and climate change policy; and discuss some general problems with CBA in the specific context of climate change. Our objectives are to explain what CBA is and how it can be used; and to illustrate its potentials and problems in the specific context of climate change.
