Discounting for Time and Risk in Energy Policy

Abstract

The volume addresses the unresolved issues pertaining to the choice of the discount rate to be used in benefit-cost evaluation of public investments and public policies in a market economy with many distortions. It analyzes the question of risk and discounting in connection with energy policy, and it addresses the issues of whether discounting at a positive rate implies intergenerational inequity and whether the benefit-cost framework is sufficiently robust to be used as the basis for choosing between alternatives that may have far-reaching consequences. It addresses the practical problems associated with trying to estimate the appropriate rate of discount, and evaluates the discounting practices within the electric power industry. Separate abstracts were prepared for chapters 2 and 4-12 selected for the Energy Data Base (EDB) and Energy Abstracts for Policy Analysis (EAPA).

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