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Use of discount rates in the estimation of the costs of inaction with respect to selected environmental concerns

Hepburn, Cameron (2007) Use of discount rates in the estimation of the costs of inaction with respect to selected environmental concerns. OECD Papers, 7 (9). pp. 1-42. ISSN 1609-1914

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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.

Item Type: Article
Official URL: http://dx.doi.org/10.1787/16812328
Additional Information: © 2007 OECD
Library of Congress subject classification: G Geography. Anthropology. Recreation > GE Environmental Sciences
H Social Sciences > HB Economic Theory
Sets: Research centres and groups > Grantham Research Institute on Climate Change and the Environment
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 28
Date Deposited: 02 Mar 2011 13:01
URL: http://eprints.lse.ac.uk/33012/

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