Cost-benefit analysis in forestry research

Cost-benefit analysis (CBA) is both a technique of analysis and a broad framework for economic evaluation of investments, for example, in development and infrastructure projects, and in research. It is applied to projects which run of a number of years, such that that discounting is used to bring costs and benefits to a comparable (present value) basis. The methodology is particularly relevant to forestry, which is a long-term investment, and forms one of the main socio-economic techniques in forestry research. As well, CBA is relevant to judging the desirability of research projects. In fact, some research funding agencies now require that a CBA of the research project be prepared as part of a grant application. This module first introduces the economic rationale for CBA. The procedures of DCF analysis and the various project performance criteria are then explained. The following section examines various practical complexities in applying CBA. Some remarks are then made on integration of non-market values in CBA. Concluding comments follow.