Special feature: objectives and sectoral use of cost-benefit analysis

Cost-benefit analysis (CBA) is a methodology for calculating all social benefits and all social costs of an investment project. It determines the viability of an investment and can provide a basis for the comparison of alternative projects before spending public money. In essence, CBA consists of comparing the expected cost of a project against its expected benefits, in order to determine whether benefits exceed costs and hence decide if the investment is convenient for society and leads to an efficient allocation of resources. In CBA, benefits and costs are expressed in monetary terms, and are adjusted for the time value of money therefore expressed in terms of their net present value (NPV). The most important application of cost-benefit analysis has been to decide upon public investment projects, thought it has also been used in other areas such as the evaluation of regulatory initiatives, called Regulatory Impact Assessment (RIA).