ABSTRACT
Environmental policies often require the allocation of large amounts of private and public resources which must be withdrawn from other purposes. The private sector complains about the difficulties, at both micro- and macro-economic level, caused by such policies. This chapter introduces the problem of public expenditures in Italy, the need for rationalization, and the role of cost-benefit analysis (CBA) in the decision-making process in relation to specific environmental projects. It reviews briefly the conceptual basis of CBA as it has been applied in Italy to environmental projects. The chapter considers some case studies which it is hoped will illustrate the methodology used to evaluate the benefits and the discrepancy, when present, between theory and practice. Finally, the obstacles to the more widespread use of benefits estimation will be reviewed by considering some technical limitations as well as some rather theoretical objections raised against the use of CBA.
