Benefit cost analysis for environmental decision making: using discounting to compare benefits and costs that occur at different points in time
S.L. Shaikh, University of Chicago, USA
This chapter discusses the role of discounting in economic benefit cost comparisons and the resulting controversy over the choice of the discount rate used to compare current and future values. The chapter first reviews the rationale for discounting, then continues into the effect of discounting across long time horizons. The chapter provides a detailed description of the approaches to discounting used in the Stern review, by Nordhaus and in other economic treatments of climate change.
benefit cost analysis
net present value