COST BENEFIT ANALYSIS.

Definition.
Cost benefit analysis is a systematic process used to evaluate the financial and economic
consequences of a project or decision. It compares the cost and benefits associated with a
particular action to determine whether it is economically justified. In EIA cost benefit
analysis is often used as a tool to access the potential impacts of a proposed project on the
environment, society, and economy.
The major purpose of cost benefit analysis is to help decision makers to determine whether a
project is economically or socially viable.
How Cost benefit analysis is used as a tool in impact analysis in EIA
1. Identification of costs and benefits.
In EIA the first step is ton identify and quantify the various costs and benefits associated with
the project e.g., construction expenses, operational costs, and environmental mitigation
measures. Benefits may encompass economic gains, environmental improvements, and social
benefits.
2. Monetization.
To compare costs and benefits, monetary values are attached to both tangible and intangible
factors. It can be used in impact analysis to assign monetary values to environmental and
social impacts making it possible to compare and weigh these impacts against economic
costs. It can be applied in various ways i.e., valuation of environmental benefits, cost
estimation, resource scarcity, and depletion.
3. Discounting.
Future costs and benefits are typically discounted to present value to account for the time
value of money, meaning future values are adjusted to reflect their worth in today’s value
4. Net Present Value (NPV).
The core of CBA is to calculate the net present value which is the difference between the
total discounted benefits and the total discounted costs. A positive NPV indicates that the
project is economically viable while a negative NPV suggests it may not be worth while
5. Sensitivity analysis.
CBA often involves sensitivity analysis to assess how changes in assumptions or variables
impact the results. This helps in understanding the level of uncertainty in the analysis.
6. Decision making.
The final CBA results inform decision makers whether the project should be approved,
modified, or rejected based on its economic viability and potential impacts.
In EIA cost benefit analysis is used to assess the environmental and social impacts of a
proposed project considering both the positive and negative consequences and assigning
monetary values to these impacts hence making informed choices whether a project should
proceed, be modified, or be abandoned based on its overall economic and environmental
impact.
Advantages of using CBA in EIA.
 Cost benefit analysis provides a structured framework for quantifying and comparing
costs and benefits, which helps in making EIA more objectives and data driven.
 It allows for the monetization of environmental and social impacts, making it easier to
compare and prioritize different projects or policy options.
 CBA helps in allocation of resources to projects that provide the highest net benefits
to society, ensuring efficient use of resources.
 CBA makes the decision-making process transparent

Small scale mining

Small scale mining refers to a form of mining that involves the extraction of minerals or other
geological materials with limited capital, workforce, and equipment. It is often carried out by
individuals or small groups, using basic tools and methods, and typically operates on a
smaller scale then larger-scale mining operations. Small scale mining can include activities
such as artisanal mining, subsistence mining, or informal mining, and is often associated with
rural or economically marginalized communities.

Tools than can be used in conducting EIA in small scale mining

Overlay and GIS
Overlays in GIS can combine various layers of spatial data, such as topography, vegetation
cover, water bodies and ecologically sensitive areas. This helps identify areas vulnerable to
environmental impacts from mining activities, allowing for targeted assessments and
mitigation measures.
By overlaying historical maps or satellite imagery with current mining site data, GIS tools
can visualize and quantify changes in land use, land cover and vegetation cover time due to
mining activities. This aids in understanding the extent of environmental alteration.
GIS overlays enable the assessment of mining site’s proximity to critical features like water
resources, protected areas, wildlife habitats and residential zones. This analysis helps identify
potential risks and impacts on these sensitive areas.
WeGIS-based overlays assist in designing effective mitigation strategies by visualizing
potential impacts and identifying suitable locations for waste disposal, reclamations efforts,
or buffer zones to minimize adverse effects on the environment and local communities.
GIS overlays assist in ensuring compliance with environmental regulations by visualizing the
boundaries of protected areas, legal mining zones and areas designated for conservation or
restricted activities.
GIS-based overlays enable the identification and assessment of potential environmental risks,
facilitating the development of risk management plans and emergency response strategies for
various scenarios.

Cost benefit analysis

This tools can be used to identify costs and benefits. Costs; EIA experts identify and
I'llquantify the potential costs associated with the proposed small scale mining activities.
Benefits; this are the positive economic impacts, such as job creation, increased income, and
contribution to local economies are identified and quantified.

Risk assessment
Risk assessment plays a crucial role in EIA for small scale mining by identifying potential
hazards and evaluating their likelihood and impact on the environment and the surrounding
communities.
Risk assessment can be used to identify potential risks. Conducting a systematic analysis to
identify various risks associated with small scale mining activities such as soil erosion, water
pollution, air quality degradation, habitat destruction and socio-economic impacts on local
communities.
Assessing probability and severity; evaluating the probability of occurrence and severity of
identified risks using historic data, expert knowledge and predictive models. This helps
prioritize risks based on their potential impact.
Quantifying environmental impacts; using risk assessment methods to quantify the potential
environmental impacts caused by mining activities, such as soil and water pollution, habitat
loss or disruption of ecosystem services.
Developing mitigation strategies; based on the identified risks, developing targeted mitigation
strategies and management plans to minimize the likelihood and impact of these risks. This
may involve measures such as implementing proper waste management, erosion control,
reclamation efforts or alternative mining practices.
Stakeholder engagement; involving stakeholders including local communities, regulatory
bodies and mining operators in the risk assessment process to gather diverse perspectives,
share information and garner support for mitigation measures.
Monitoring and adaptation; establishing monitoring protocols to track identified risks and
their impacts during the after mining activities. This facilitates adaptive management,
allowing for adjustments in mitigation strategies as needed based on real-time data.
Compliance and reporting; integrating risk assessment findings into the EIA report to ensure
compliance with environmental regulations and guidelines. This helps in transparency
communicating 0the potential risks and proposed mitigation measures to stakeholders and
regulatory authorities.
Characteristics of small scale mining
 1. Limited scale and capacity; small scale mining projects typically involve a relatively
small area and a limited amount of extracted resources compared to larger mining
operations.
2. Simple technology and equipment’s; small scale mining often employs basic tools
and equipment, which can have implications for the efficiency of resource extraction
and the potential environmental impacts.
3. Local workforce; these mining operations usually rely on a local workforce, often
comprised of individuals or small groups from nearby communities contributing to
the socio-economic aspects of the region.
4. Informality; small scale mining is sometimes characterized by informal or artisanal
practices, which may involve less stringent regulations and oversight compared to
larger, formal mining operations.#
5. Resource diversity; small scale mining may target a variety of resources, including
minerals, gemstones, or other geological materials, depending on the local context and
geological conditions.
6. Limited capital investment; the financial resources invested in small scale mining
projects are generally limited, influencing the scale of operations and the technology
employed.
7. Proximity to communities; small scale mining often occurs in close proximity to
local communities, necessitating attention to potential social and environmental
impacts on these communities.
8. Variable environmental practices; due to diverse contexts and informal nature,
environmental practices in small scale mining vary widely, emphasizing the
importance of tailored assessment in the EIA process.
9. Potential for informal supply chains; small scale mining products may enter
informal supply chains, making it crucial to consider not only the direct
environmental impacts but also the broader implications for trade and market
dynamics.
10. Sensitivity to changes; small scale mining operations may be more sensitive to
changes in regulations, market conditions, or environmental factors requiring adaptive
management strategies.
Advantages of small scale mining
1. Employment opportunities; small scale mining often provides job opportunities for
local residents, reducing unemployment and improving livelihoods within the
community.
2. Economic development; it contributes to local economic growth by generating
income for miners and supporting related businesses such as equipment suppliers,
transport and services.
3. Local revenue generation; small scale mining operations may contribute to local
government revenues through taxes, royalties or other financial arrangements, which
can be utilized for community development projects.
4. Support for local infrastructure; mining activities might lead to investments in
infrastructure development, such as roads, electricity, and water supply benefiting the
entire community.
 5. Social development; in some cases, small scale mining operations support social
development initiatives, such as funding education or healthcare programs for local
residents.
6. Cultural preservation; mining activities might also support the preservation of
cultural heritage and traditions within the community by providing resources for their
maintenance.

Disadvantages of small scale mining to the local community

1. Environmental degradation; small scale mining can lead to deforestation, soil
erosion, and disruption of the local ecosystems. Improper waste disposal and the use
of toxic substances in extraction processes may also harm water quality and aquatic
life.
2. Water pollution; the use of chemicals in mining processes can contaminate local
water resources, affecting both surface water and groundwater quality. This can have
significant implications for the health of the community and its access to clean water.
3. Land use changes; mining activities may result in changes to the landscape, altering
the use of land and potentially affecting agriculture or other livelihoods in the area.
4. Health risks; exposure to hazardous substances used in mining, such as mercury or
cyanide, can pose health risks to both miners and local residents. Dust and particulate
matter from mining operations can also contribute to respiratory problems.
5. Social conflicts; competition for resources, disputes over land ownership, and
changes in traditional land use patterns can lead to social conflicts within the
community.
6. Loss of biodiversity; habitat disruption and land-use changes associated with mining
can contribute to the loss of local flora and fauna, impacting biodiversity in the area.
7. Livelihood changes; with small-scale mining can provide employment opportunities,
it may also lead to fluctuations in local economies and changes in traditional
livelihoods. Dependence on mining can create vulnerability to market fluctuations.
8. Infrastructure challenges; increased population and mining activities may strain
local infrastructure, such as roads, housing, and healthcare facilities, affecting the
overall quality life of the community.
9. Cultural impacts; mining can disrupt cultural practices and traditions, leading to a
loss of cultural identity for local communities. It may also introduce external
influences that can alter the social fabric of the community.
10. Limited access to resources; in some cases, small scale mining may restrict access to
land and resources for local communities, potentially impacting their ability to sustain
traditional practices.
Types of small scale mining
1. Artisanal mining; this type involves individuals or small groups using basic
equipment and manual labour to extract minerals like gold, diamonds, gemstones, and
even some metals. It’s often done in riverbeds, streams, or shallow underground
deposits.
 2. Small-scale gold mining- specifically targeting gold extraction, this type involves the
use of basic techniques like panning, sluicing, and digging in riverbeds or alluvial
deposits. It can also include rudimentary underground mining methods.
3. Quarrying; small-scale quarrying involves the extraction of stones, sand, gravel, and
other construction materials. It’s often done with basic tools and equipment,
supplying materials for local construction needs.
4. Small scale mineral exploitation; this involves prospecting and exploring for various
minerals, including base metals, rare earth elements, and industrial minerals. It
focuses on identifying potential deposits for further extraction.
5. Small scale coal mining; in some regions, small scale mining activities focuses on
coal extraction, typically using basic methods to access coal seams for local
consumption or use.

CBA Challenges in EIA

Weaknesses/challenges in using cost benefit analysis in EIA

Cost-benefit analysis (CBA) in Environmental Impact Assessment (EIA) has its limitations.
One challenge is the difficulty in assigning monetary values to environmental and social
factors accurately. Additionally, predicting long-term impacts and accounting for
uncertainties poses challenges, potentially leading to biased outcomes. CBA may also neglect
non-market values, such as cultural or aesthetic aspects, affecting the comprehensiveness of
the analysis. Furthermore, the method relies on assumptions that may not always reflect real-
world complexities, impacting the reliability of the results.

Types of cost benefit analysis

There are several types of cost-benefit analysis (CBA) used in different contexts:

Standard Cost-Benefit Analysis: Evaluates projects or policies by comparing the total costs
and benefits over a specific time period, considering both monetary and non-monetary
factors.
Net Present Value Analysis (NPV): Adjusts future costs and benefits to their present values
to account for the time value of money. This method helps in comparing the present value of
costs against the present value of benefits.

Cost-Effectiveness Analysis (CEA): Focuses on achieving a specific objective at the lowest

possible cost. It compares alternative projects or policies based on their unit costs per
outcome, often used in healthcare and public health.

Social Return on Investment (SROI): Goes beyond traditional CBA by incorporating social
and environmental impacts. It assigns monetary values to non-market factors and assesses the
overall social return of a project or policy.

Risk-Benefit Analysis: Considers the uncertainty and risks associated with costs and
benefits, providing a more nuanced understanding of potential outcomes.

Distributional Cost-Benefit Analysis: Examines how costs and benefits are distributed
among different groups in society, addressing concerns about equity and fairness.

Dynamic Cost-Benefit Analysis: Considers the dynamic nature of costs and benefits over
time, accounting for changes in variables such as technology, demographics, and market
conditions.

Partial Cost-Benefit Analysis: Focuses on specific aspects of a project or policy, providing

a more targeted analysis rather than a comprehensive overview.