2021-01-18 GC - Item 3 - Attachment 3 - Cost Benefit Analysis for Coastal Erosion Options

3.          Cost benefit analysis conceptual model

3.1.        Overview of CBA
Cost benefit analysis (CBA) is the most common form of economic evaluation used to inform the merit
of a proposed investment, whether for public or private projects. When done well, CBA makes the
implications of decisions clear and transparent. Its advantage as an analytical tool includes the
following features:

•    costs and benefits are expressed in monetary terms and hence are directly comparable

•    discounted cash flow analysis is used to calculate results in ‘present value’ terms, enabling direct
     comparison of projects with costs and benefits that vary over time

•    costs and benefits are considered from the perspective of the community, rather than any
     particular individual or interest group.

In principle, economic CBA includes all costs and benefits to the community. It incorporates the value
that people place on all financial, social and environmental outcomes. The six basic steps in CBA are
shown in Figure 1. The analysis undertaken for this project follows the approach set out in the
Queensland Governments Project Assessment Framework (PAF) (Queensland Treasury, 2015).

The key decision-metric output of CBA is the Net Present Value (NPV), which measures the present
value of net benefits. It is calculated as the present value of all benefits minus the present value of all
capital and recurrent costs within the appraisal period for the project.




                                         Figure 1      Indicative steps of CBA



3.2.        Conceptual CBA model
Aither developed a conceptual model of the potential costs and benefits of coastal hazard adaptation
options, in consultation with Council (Figure 2).


AITHER | Final Report                                                                                     10
Noosa Shire Council – Coastal Hazard Adaptation Plan