Cost Benefit Analysis
What is it?
A Cost-Benefit Analysis is a process that compares the relative strengths and weaknesses of different proposed courses of action. It usually includes a comparison with the current situation. Unlike the term might suggest, the ‘cost’ is not always assessed in dollars, and may be assessed in terms of staff time, opportunity costs (missed opportunities), reputational impacts, etc. Similarly with benefits, modelling can be used to assign a value to intangible items, such as citizen well-being or neighborhood aesthetic.
In the case of natural infrastructure, this would include consideration of the impacts on (or improvements to) the associated assets, functions, or benefits.
How can municipalities use it?
Municipalities can use Cost-Benefit Analyses to inform decisions on a project, policy, or other action. Traditional Cost-Benefit Analyses help municipalities choose between different infrastructure options. More comprehensive Cost-Benefit Analyses can help municipalities understand the options that would not be available (opportunity costs) between various options, or help to incorporate more facets of a decision (e.g., long term maintenance costs, social impacts, environmental impacts). Results of a Cost Benefit Analysis can also help citizens understand the reasoning behind municipal decisions.
What are the advantages?
Cost Benefit Analyses have the following advantages:
Provides measurable financial metrics that help determine if one action is more or less feasible than another
Considers alternatives and whether an action provides more benefits than the status quo
Can help explain to citizens the rationale for municipal decisions
Can create commensurate values for comparing otherwise incomparable elements of a decision
What should you watch out for?
No tool is a silver bullet. There are some important aspects to consider with regard to Cost Benefit Analyses, including:
For large projects with long-term horizons, forecasted costs and benefits may not be accurate
Accurate representations of present and future benefits and costs is challenging
Intangible values (e.g., aesthetics, social impacts) are difficult to represent
What is considered (input data) can be tweaked to generate whatever outcome is desired (e.g., environmental impacts can be excluded)
Analysis may think only in terms of short-term expenses (e.g., up-front construction, current fiscal year, etc.)
Different input considerations may be ‘apples and oranges’ and require a common currency of assessment to be valid
How can it help maintain natural infrastructure?
A Cost-Benefit Analysis can be an opportunity to ensure that natural infrastructure benefits, functions and assets are considered in the rationale for decision making. This can identify policies or other actions that result in increased or sustained ecosystem benefits, and can ‘price in’ economic externalities (i.e., make sure ecosystem services not usually included in economic analyses are considered). The result can be a more robust picture of the contribution of natural infrastructure to the municipality, and similarly a better understand of the cost to the municipality when these assets and benefits are lost.
Cost of Community Services Assessment – An example of the Cost of Community Services Assessment approach, in this case used in Red Deer County to determine the revenues versus expenses of four broad types of land use in the County; Summary brochure and Main Report document.
Highway Wildlife Mitigation Opportunities for the Trans-Canada Highway in the Bow River Valley - An assessment of the various opportunities for ‘mitigating’ a major highway (i.e., facilitating the safe flow wildlife across a highway corridor) in Alberta, including an assessment of the cost to society of unmitigated roadways due to vehicle/wildlife collisions.
Cost Effectiveness of Beaver Co-Existence – Two academic papers and one fact sheet looking at the costs versus the benefits of various scenarios of beaver management. Efficacy and Comparative Costs of Using Flow Devices to Resolve Conflicts with Beavers Along Roadways, Mitigating infrastructure loss from beaver flooding: A cost–benefit analysis, and Cost-Benefit Analysis of Beaver Coexistence Tools.
Municipal Land Use Suitability Tool - This tool developed by the Miistakis Institute allows municipalities to identify areas for utility scale wind and solar developments relative to their important agriculture, ecology and cultural and scenic resources at a municipal scale (also called the Least Conflict Lands for Renewable Energy Developmenttool).
Did we miss something?
If you know of a resource that should be on this list - or your municipality has a sample or case that should be here, please let us know!