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Use of Discount Rates in the Estimation of the Costs of Inaction with Respect to Selected Environmental Concerns

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Abstract

This paper reviewed current discounting practice in the OECD. It found a wide variance in guidance across countries (which may or may not be justifiable by different economic conditions), and significant differences in guidance within countries. Furthermore, even when discounting guidance is specified, it is not always followed in practice.A clear conclusion from this study is the allocation of public funds would be substantially improved if OECD countries provided departments with a consistent set of guidance on discounting. This guidance should provide for the analysis of long-term projects, programmes and policies, which are increasingly important, particularly with respect to environmental concerns. Finally, guidance should incorporate advances in theory of discounting under long-term uncertainty. A recipe for determining the appropriate rate of decline in the discount rate is included in this paper.

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  • Oecd, 2007. "Use of Discount Rates in the Estimation of the Costs of Inaction with Respect to Selected Environmental Concerns," OECD Papers, OECD Publishing, vol. 7(9), pages 1-42.
    • Handle: RePEc:oec:packaa:5l4bgfcvkjxt
    DOI: 10.1787/oecd_papers-v7-art28-en
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    Cited by:

    1. Peter Zwaneveld & Gerard Verweij, 2014. "Safe Dike Heights at Minimal Costs: An Integer Programming Approach," CPB Discussion Paper 277.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    2. Ram Fishman, 2019. "Heterogeneous Patience, Bargaining Power and Investment in Future Public Goods," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(4), pages 1101-1107, August.
    3. Eva Palinko & Agnes Svoob & Marta Szabo, 2013. "Enhancing the Financial Absorption Capacity of EU Member States Through the Reconsideration of Current Allocation Rules," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 20(3), pages 351-366, November.
    4. Foltyn-Zarychta, Monika, 2010. "An attempt to define the discount rate in the light of the type of investment project," MPRA Paper 40188, University Library of Munich, Germany, revised 2010.
    5. Tim Keighley & Thomas Longden & Supriya Mathew & Stefan Trück, 2014. "Quantifying Catastrophic and Climate Impacted Hazards Based on Local Expert Opinions," Working Papers 2014.93, Fondazione Eni Enrico Mattei.
    6. Zwaneveld, P. & Verweij, G. & van Hoesel, S., 2018. "Safe dike heights at minimal costs: An integer programming approach," European Journal of Operational Research, Elsevier, vol. 270(1), pages 294-301.
    7. Jolanta Bijańska & Krzysztof Wodarski & Aneta Aleksander, 2022. "Analysis of the Financing Options for Pro-Ecological Projects," Energies, MDPI, vol. 15(6), pages 1-30, March.
    8. Peter Zwaneveld & Gerard Verweij, 2014. "Safe Dike Heights at Minimal Costs: An Integer Programming Approach," CPB Discussion Paper 277, CPB Netherlands Bureau for Economic Policy Analysis.
    9. Cameron Hepburn & Greer Gosnell, 2014. "Evaluating impacts in the distant future: cost–benefit analysis, discounting and the alternatives," Chapters, in: Giles Atkinson & Simon Dietz & Eric Neumayer & Matthew Agarwala (ed.), Handbook of Sustainable Development, chapter 9, pages 140-159, Edward Elgar Publishing.

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