Has Cost Benefit Analysis Improved Decisions in Colombia? Evidence from the Environmental Licensing Process

Abstract

Environmental cost benefit analysis, CBA, is often the preferred method for economists to assess policy changes which have environmental consequences. It is argued that CBA can help governments focus their resources to maximize the social returns of investments or projects. CBA is also viewed as a useful framework for organizing disparate information and subsequently improve the decision process. Despite the enthusiasm for the method, there have been few attempts outside developed countries to assess CBA's influence on decisions. In this article we used content analysis of official documents to analyse the role played by CBA in the Colombian environmental licensing process. Our results show that CBA's influence on the final decisions has been limited. The problem, we conclude, does not reside in CBA but in the process. Although there is a procedural requirement to do CBA, there is no requirement that the results must be considered in the decision-making. Since the problem lies in the process, not the instrument, we think that merely using a non-monetary assessment method instead of CBA, such as multicriteria analysis, will not lead to better decisions. This latter point is a discussion missing from the ecological economics literature that deserves more attention.