The role of a calculative method in sustainable transitions How to mitigate the sources of inaccuracy in cost-benefit analyses

Abstract

Sustainability is a growing concern globally and investments are needed to prevent irreversible and catastrophic impacts. For these investments to be a realized, they must be communicated in an attractive way. This can be achieved with the calculative method of cost-benefit analysis (CBA). CBA is commonly used to appraise infrastructure projects in the public sector, which is why the engineering department of the town of Canmore’s intends to implement CBA as a method for their sustainable transition. This thesis aims to support the engineering department’s implementation of CBA, and to contribute and expand upon previous research regarding CBA. To reach this aim, the study used the method of systematic combining. This method enables simultaneous development of academia and practice. Furthermore, the research was conducted by an extensive literature review, semi-structured interviews, and a conceptual CBA, including a sensitivity analysis. Previous research concludes that there are challenges with inaccuracy in CBA, with three possible explanations; technical-, political-economic-, and psychological explanations. The study shows that all explanations are, or could be, prevalent in Canmore, and describes three ways to mitigate the inaccuracies; putting an early effort to improve data, aligning incentives, and adopting the method of reference class forecasting. In contrast to previous research regarding inaccuracies in CBA, this study suggests a correlation between the cognitive structure of involvement and bias. This correlation might connect how individuals’ make decisions with inaccuracies in a calculative method. Thus, Canmore has a good chance, of mitigating possible inaccuracies and implement CBA in an efficient way, to perform a sustainable transition.