Cost-Benefit

Analysis (CBA)
ENGR. KRISTOPHER RAY S. PAMINTUAN, M.SC.
What is CBA?
A relative analysis of a trade-off between what are
the perceived advantages and disadvantages of
choices or replacements to an existing process
For example: Shifting from BS ChE to BS-MS ChE
What is CBA?
The analysis can either be qualitative or quantitative

Qualitative – subjective
Quantitative – objective
Why do a CBA?
A CBA allows any decision–making body to make the
most informed decision minimizing risks and ensuring
returns
Making a decision without a CBA is like diving into a
body of water without knowing its depth.
Where in an LCA will a CBA
appear?
Improvement Analysis
You will compare sought or suggested alternatives to
the existing by virtue of a CBA
How to perform a CBA
1. Select a common unit
2. State the perceived costs and benefits qualitatively
3. Counter check the validity of your claims through
rigorous research
4. Quantify your costs and benefits
Selecting a common unit
In financial analyses, the most used common unit is
money.
In an LCA, a common unit you can choose is the
heaviest impact identified in your Impact
Assessment.
You can have multiple common units, but in separate
CBAs.
Example
You are contemplating buying a new refrigerator to
replace your old one. Decide on a common unit of
comparison for your CBA.
Costs and Benefits
Qualitatively speaking, this can be as simple as listing
advantages over disadvantages
Advantages Disadvantages
Current technology
Option A
Option B
Example
You are contemplating buying a new refrigerator to
replace your old one.
Current Ref: 5 years old, expired warranty, single door
Ref A: Brand new, single door, 3 years warranty, larger
capacity
Ref B: Second hand, 1 year used, 2 doors, 5 years
warranty, energy star certified, larger capacity
Counter-checking
This step needs to be done because of several
factors:
- costs/benefits may be too ideally assumed
- some benefits are actually costs, dressed as
benefits, and vice-versa
Quantifying costs and benefits
Quantification involves research; not just mere
assumptions of values
Gaps are calculated, as well as gap of gaps
Costs Benefits Gap (C-B)
Current Ref
Option A
Option B
Example
Let’s say that we use money as a common unit
Costs
Current Ref PhP 10,000 as of 2013,
equivalent to PhP 14,026 today
accounting for 7% inflation
Ref A PhP 20,000 as of 2018
PhP 1,000 as monthly
additional energy
Ref B PhP 12,000 as of 2018
Benefits Gap (C-B)
PhP 2,000 as monthly savings PhP 12,026
from food spoilage
PhP 3,000 as monthly savings PhP 18,000
from food spoilage
PhP 1,000 as monthly energy PhP 8,000
savings
PhP 3,000 as monthly savings
from food spoilage
Exercise
Examine the LCA entitled “Life Cycle Assessment of
PE-Al Composite Recycling Process”. Comment in
detail on the CBA performed by the authors. Then
perform an improved version of the original CBA.