Library Header Image
LSE Research Online LSE Library Services

On non-marginal cost-benefit analysis

Dietz, Simon ORCID: 0000-0001-5002-018X and Hepburn, Cameron (2010) On non-marginal cost-benefit analysis. Centre for Climate Change Economics and Policy and Grantham Research Institute on Climate Change and the Environment (18). Centre for Climate Change Economics and Policy and Grantham Research Institute on Climate Change and the Environment, London, UK.

Download (954kB) | Preview


Conventional cost-benefit analysis incorporates the normally reasonable assumption that the policy or project under examination is marginal in the sense that it will not significantly change relative prices. In particular, it is assumed that the policy or project does not change the underlying growth rate of the economy. However, these assumptions may be inappropriate in some important circumstances, such as large development projects in small economies, or large-scale infrastructure investment programmes. This paper develops the theory on the evaluation of non-marginal policies and projects, with an empirical application to the mitigation of global climate change. We examine the conditions under which evaluation of a non-marginal project using marginal methods may be both qualitatively and quantitatively wrong, and explore the magnitude of the potential error using a commonly employed integrated assessment model of climate change.

Item Type: Monograph (Working Paper)
Official URL:
Additional Information: © 2010 The Author
Divisions: Geography & Environment
Grantham Research Institute
Subjects: G Geography. Anthropology. Recreation > GE Environmental Sciences
H Social Sciences > HC Economic History and Conditions
JEL classification: D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency; Cost-Benefit Analysis
H - Public Economics > H4 - Publicly Provided Goods > H43 - Project Evaluation; Social Discount Rate
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q54 - Climate; Natural Disasters
Date Deposited: 26 Jul 2011 10:52
Last Modified: 16 May 2024 11:53

Actions (login required)

View Item View Item


Downloads per month over past year

View more statistics