Environmental externalities and the social rate of discount
Some have advocated that costs or damages associated with environmental impact should either not be discounted, or should be discounted using a social discount rate which is lower than the utility's private discount rate. Because this approach seems flawed, it is vital that those who advocate it fully explicate their reasons and reveal their assumptions. It is becoming increasingly widespread, if not usual, practice for utilities and regulatory commissions to account explicitly for the environmental costs of resource utilization when developing and evaluating integrated resource plans. This issue is being addressed in different ways in different jurisdictions. In many cases an attempt is made to monetize environmental impacts and then treat these values as either (1) costs attendant to the resources that create the impacts or (2) benefits associated with resources that mitigate such impacts. The environmental impacts are thus treated in the context of standard benefit-cost calculus, which implies the evaluation of relevant cash flows on a discounted present value basis. The discounting of monetized environmental impacts has generated much controversy beyond the usual quarrels over how best to measure the utilities' costs of funds. The controversy centers around the notion that, for a variety of reasons, the cash flows associated with environmental impacts should either not be discounted, or should be discounted using a social discount rate which is lower than the utility's private discount rate.
- OSTI ID:
- 5233270
- Journal Information:
- Electricity Journal; (United States), Journal Name: Electricity Journal; (United States) Vol. 6:10; ISSN ELEJE4; ISSN 1040-6190
- Country of Publication:
- United States
- Language:
- English
Similar Records
Intergenerational transfers and the social discount rate
Social effects of nuclear power plants
Related Subjects
290300* -- Energy Planning & Policy-- Environment
Health
& Safety
296000 -- Energy Planning & Policy-- Electric Power
COST BENEFIT ANALYSIS
ECONOMIC ANALYSIS
ECONOMICS
ELECTRIC UTILITIES
ENVIRONMENTAL POLICY
GOVERNMENT POLICIES
MANAGEMENT
PUBLIC UTILITIES
RESOURCE MANAGEMENT