Choices with consequences for the earth’s resources are taken daily all over the world. There is therefore a need to understand the variety of aspects that characterize the decision-making process in order to constantly improve the quality of the choice, especially in terms of its environmental impact. Considering and analyzing various possible alternatives, before actually implementing a policy or a project, can provide the necessary support for making a responsible choice. The alternatives should take into account the short and long term impacts on the environment and society. It is also useful to evaluate the effect of already applied strategies in order to learn from past experience.
A decision-making process can obviously be undertaken in a variety of ways according to the type of choice, the conditions and the constraints that may be present, the type of environmental, economic, social and cultural issues taken into account. However we may want to consider some very general, indicative steps to decision making as follows:
STEPS IN DECISION MAKING
- Identify the issue
- Gather information
- Set goals
- Present, evaluate, and compare alternatives
- Choice (decision-making)
- Implement and monitor
First the issue is identified, the information about the topic is collected and the goal to achieve is set. Then it is necessary to analyze and compare possible alternatives from an economic, environmental, social and cultural perspective. This process is necessary before undertaking any choice, and can be pursued by using various tools that may, or may not, imply monetary valuation. Some of the most common tools for a quantitative, semi-quantitative or qualitative analysis are described below. An alternative will be chosen according to the aim of the decision maker. Once the choice is made, it will be implemented and monitored. At this stage can be relevant to evaluate the real outcome.
SOME TOOLS FOR DECISION MAKING
CBA is known since 1808. It is based on the assessment and comparison of the costs and the benefits involved in a choice. It implies that the environmental, social and cultural aspects and effects are translated into monetary terms. Very common measures within CBA are:
- Net Present Value (NPV). It is given by the sum of discounted net benefits. It shows to which extent the decision can generate benefits.
- Benefit Cost Ratio (BCR). It is given by the ratio between discounted benefits and discounted costs. It shows to which extent the benefits exceed the costs.
- Internal Rate of Return (IRR). It is given by the discount rate for which the NPV is equal to zero. It shows the maximum acceptable discount rate.
As CBA may imply several assumptions, it can be useful to make a sensitivity analysis to take into account the uncertainty related to the analysis.
MCA takes simultaneously into account several and conflicting objectives and values that may have different units of measurement. A number of Multi-criteria methods with different degrees of sophistication can be applied. Each method is based on philosophical assumptions about individual preference structure modeling, is related to certain algorithms and ways of processing data including making use of software packages.
CEA looks only at the costs involved. It may be used when considering projects/programs that have the same expected benefits or where the benefits cannot be measured. It aims at finding the cheapest alternative.
RBA is applied in projects that involve a great deal of risk which can be translated into monetary terms. It implies the comparison of the risks to the expected benefits. The aim is to find alternatives where benefits outweigh risks.
EIA is systematic procedure for collecting information about the environmental impacts directly arising from a project or a policy, and for measuring the impacts. The significance of the impacts is expressed through a score or a weight. In some cases the assessed impacts can be valuable inputs for a CBA. The main objective of the EIA is to identify alternative means of minimising the environmental impacts without altering the benefits of the project or policy.
Strategic Environmental Assessment (SEA)
SEA is similiar to EIA. However it tends to operate at a higher level of decision-making. SEA would consider entire programmes of investments or policies instead of single projects or policies. The goal of SEA is to look for the synergies between individual policies and projects and to evaluate alternatives in a more comprehensive manner.
LCA identifies the environmental impacts of a policy or project and tries to measure them. It looks not only at the impacts directly arising from a project or policy but at the whole ‘life cycle’ of impacts.
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