Costs, benefits and sustainability in decision-making, with special reference to global warming

Environmental decision-making, like economic decision-making, often involves trade-offs. Decision-makers need techniques with which to compare the costs and benefits involved. For some environmental problems, such as global warming, there are insuperable difficulties to making operational what might seem the obvious technique, cost-benefit analysis. Broadening the decision-making framework, four models are presented - cost-oblivious, cost-effective, and cost-sensitive models and strict cost-benefit analysis - which give increasing weight to the role of cost in influencing the policy objective. The practical principles that can be derived from the emerging concept of environmental sustainability are shown to be able to play an important role in guiding environmental policy for all the models except for strict cost-benefit analysis. They can also be used to derive quantitative targets for environmental policy, and this is carried out for carbon emissions in relation to climate change. These principles may therefore be particularly useful for those issues for which, like global warming, the application of CBA is problematic.