What are the best practices for conducting cost-benefit analysis for sustainable fisheries?

1 Define the scope and objectives

The first step in conducting CBA for sustainable fisheries is to define the scope and objectives of the analysis. This involves identifying the problem or issue that the intervention aims to address, the stakeholders and beneficiaries involved, the alternative options or scenarios to compare, and the time horizon and discount rate to use. The scope and objectives should be clear, specific, and consistent with the relevant policy framework and the available data and resources. They should also reflect the values and preferences of the stakeholders and beneficiaries, as well as the potential trade-offs and synergies between economic, social, and environmental outcomes.

2 Identify and measure the benefits and costs

The next step is to identify and measure the benefits and costs of each option or scenario. Benefits and costs are the changes in welfare that result from the intervention, compared to a baseline or reference situation. They can be direct or indirect, market or non-market, private or public, and positive or negative. For sustainable fisheries, some of the common benefits include increased fish production and income, improved food security and nutrition, enhanced ecosystem services and biodiversity, reduced greenhouse gas emissions and climate change impacts, and increased social equity and cohesion. On the other hand, costs may include reduced fish stocks and diversity, increased fishing effort and operational costs, increased environmental degradation and pollution, increased conflicts and disputes, and increased management and enforcement costs. To measure the benefits and costs accurately, you need to use appropriate methods and data sources such as market prices, shadow prices, valuation techniques, surveys, models etc., taking into account uncertainty, variability, and risk factors that may affect the outcomes.

3 Compare and aggregate the benefits and costs

The third step in the process is to compare and aggregate the benefits and costs of each option or scenario. This involves converting them into a common unit of measurement, usually money, and applying a discount rate to reflect the time value of money and social preference for present or future consumption. The discount rate is a key parameter that can significantly influence the results of CBA, so you need to select it carefully and transparently, based on ethical and empirical considerations. Additionally, you should consider the distributional effects of the intervention, such as who gains and who loses, as well as how the benefits and costs are shared among different groups and regions.

When comparing and aggregating the benefits and costs, there are various criteria and indicators that you can use. Net present value (NPV) is the difference between the present value of benefits and the present value of costs; if it’s positive, then it indicates that the benefits outweigh the costs. Benefit-cost ratio (BCR) is the ratio of the present value of benefits to the present value of costs; if it’s greater than one, then it means that the benefits exceed the costs. Internal rate of return (IRR) is the discount rate that makes NPV equal to zero; it represents the average annual return on investment, with a higher IRR indicating a more attractive option. Cost-effectiveness analysis (CEA) is a variation of CBA that compares different options or scenarios that achieve similar levels of benefits or objectives; it measures cost per unit of outcome such as cost per ton of fish or cost per life saved, helping you identify the least-cost option or most efficient use of resources.

4 Evaluate and communicate the results

The final step is to evaluate and communicate the results of CBA for sustainable fisheries. This involves interpreting and presenting the results in a clear, concise, and transparent manner, highlighting the main findings, implications, and limitations. You also need to conduct a sensitivity analysis to test how the results change with different assumptions, parameters, or scenarios, and to identify the key drivers and uncertainties. Moreover, you need to involve and consult the stakeholders and beneficiaries throughout the process, to ensure their participation, feedback, and acceptance. You should also consider the ethical, institutional, and political aspects of the intervention, and how they may affect its feasibility, acceptability, and sustainability.

5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?