Introduction

Abstract

W e want our environment to be safer and cleaner. But how clean or safe it should be? How clean we should make the sea or air? Should we build a new dam for flood protection? Or we just tolerate the flood to get rid of the negative impact of the dam on the eco-system? Like these questions- nothing comes for free. If we want to get something, then we got to forgo something. Same with environmental resources, which are entirely public goods and are limited. So before making any decision regarding the use of such public goods, we need to compare the benefits of defending environmental resources compared with the opportunity costs or benefits forgone for alternative uses, i.e., conducting cost-benefit analysis (CBA). Accordingly, economists rely on empirical research in the form of benefit-cost analysis to aid decision makers for arriving at more informative and economically efficient choices by balancing the costs of environmental goods against their benefits (Mitchell and Carson 1989).