Economic analysis of environmental policy: concerns regarding the use and role of the social discount rate
by Bridget Lyons, C.J. Wang
Interdisciplinary Environmental Review (IER), Vol. 3, No. 2, 2001

Abstract: The analysis of environmental policy and/or regulation involves determining and assessing the impact of costs and benefits which may accrue over many years. There are a number of intertemporal issues related to such decisions including whether and how to state future costs and benefits in today's terms through a technique known as discounting. In practice, economic analysis of environmental issues generally involves discounting future costs and benefits at a rate known as the social discount rate. This paper examines the decision to discount future benefits and/or costs and highlights the rationale for the technique. The more controversial and problematic aspects of this procedure are analyzed so that those assessing environmental investments may make more informed decisions.

Online publication date: Mon, 13-May-2013

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