development sometimes offers a first-mover advantage (Childs and Triantis, 1999), but freeriding on the technology development or sunk costs of other firms can also give a second-mover advantage (Hausman and Myers, 2002; Pindyck, 2005). In the case of DSM, mineral deposits discovered through exploratory activities cannot be listed as “reserves” in firms’ asset valuations until the extraction technology is demonstrated. This offers a powerful “second mover advantage,” as the first firm to demonstrate the technology will enable the entire industry to claim discovered deposits as resource reserves (Land, 2018). Financing risks, and the financial stability of mining firms, are also of concern.

The environmental risks associated with DSM have generated significant attention from researchers, stakeholders, and regulatory authorities (Le et al., 2017; Levin et al., 2016; Dunn et al., 2019). Exploratory leasing has generated information about seabed ecosystems, but the quality of baseline environmental information is poor, and knowledge of environmental impacts is uncertain (World Bank, 2017, 2018; Dunn et al., 2018; Washburn et al., 2019). Seabed mining in the waters of national jurisdictions raises concerns about the biodiversity impacts on continental shelves, and impacts of maritime activities on local economies and cultures.

As DSM steps in the direction of commercialization, weighing the benefits and risks of mining lease proposals will be an important task for the ISA, and national jurisdictions. DSM involves siting an industrial facility in a novel environment with unknown risks, and distributing profit shares in the form of royalties and/or equity stakes in the mining operation. An integrated stakeholder benefit-cost analysis is a necessary condition to assure that the returns from the project are sufficient to justify initiation. The uncertainties associated with acceptable project performance are “deep” or “fundamental”, as these terms are used in the decision science literature on uncertainty evaluation e.g., Knight, (1921); Lempert et al., (2013a); Walker et al., (2013). As such, the use of benefit-cost analysis to evaluate DSM lease proposals faces similar challenges as the evaluation of projects to reduce or adapt to global climate risks.

The goal of this paper is to offer methodology guidance for the economic evaluation of DSM lease proposals that reflect the unique attributes of seabed mining. We draw on insights from a JBCA symposium “Perspectives on Implementing Benefit-Cost Analysis in Climate Assessment in 2014,” and reports from the European Union and the World Bank completed as part of a capacity building program with the Pacific Community to support DSM decision-making in Pacific Island countries.<sup>6</sup> We also review academic literature on ways of incorporating a precautionary element into economic evaluation, including literature on safe minimum standards; sequential decision making, involving real options and adaptive environmental management approaches; and “bottom up” or “robustness-based” decision methods.

To begin this assessment, the next section provides some background on deep seabed mining. Section 3 then describes the uncertainties that can arise in DSM project evaluation, and overviews uncertainty evaluation perspectives that can be incorporated into benefit-cost analysis. Section 4 develops three methods of incorporating precaution into the benefit-cost analysis of

> 6 The articles from the JBCA symposium include Lempert (2014), Sussman et al., (2014a, 2014b); and Toman (2014). Reports and articles stemming from the EU and World Bank program with the Pacific Community include Cardno (2016), Wakefield and Myers (2018), and World Bank (2017, 2018).

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