FEEM working papers "Note di lavoro" series
2006 .096

Valuing Environmental Factors in Cost-Benefit Analysis Using Data Envelopment Analysis


Authors: Timo Kuosmanen, Mika Kortelainen
Series: Climate Change and Sustainable Development
Editor: Carlo Carraro
Type: Journal
Keywords: Cost-Benefit Analysis,Data Envelopment Analysis,Eco-Efficiency,Environmental Valuation,Environmental Performance,Performance Measurement
JEL n.: C61,D61,Q51
JEL: Ecological Economics
Pages: Vol. 62, Issue 1, pp. 56-65
Date: 04/2007

Abstract

Environmental cost-benefit analysis (ECBA) refers to social evaluation of investment projects and policies that involve significant environmental impacts. Valuation of the environmental impacts in monetary terms forms one of the critical steps in ECBA. We propose a new approach for environmental valuation within ECBA framework that is based on data envelopment analysis (DEA) and does not demand any price estimation for environmental impacts using traditional revealed or stated preference methods. We show that DEA can be modified to the context of CBA by using absolute shadow prices instead of traditionally used relative prices. We also discuss how the approach can be used for sensitive analysis which is an important part of ECBA. We illustrate the application of the DEA approach to ECBA by means of a hypothetical numerical example where a household considers investment to a new sport utility vehicle.

Download file
Download PDF file

FEEM Update

Subscribe to stay connected.

Your personal data will be processed by Fondazione Eni Enrico Mattei. – data Controller – with the aim of emailing the FEEM newsletter. The use of Your email address is necessary for the implementation of the newsletter service. You are invited to read the Privacy Policy in order to obtain additional information about the protection of Your rights.

This Website uses technical cookies and cookie analytics, as well as “third party” profiling cookies.
If you close this banner or you decide to continue navigating on this Website, you express consent to the use of cookies. If you need additional information or you wish to express selective choices on the use of cookies, please refer to the   Cookie PolicyI agree