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Discounting the benefits and costs of environmental regulations
Author(s) -
Kolb Jeffrey A.,
Scheraga Joel D.
Publication year - 1990
Publication title -
journal of policy analysis and management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.898
H-Index - 84
eISSN - 1520-6688
pISSN - 0276-8739
DOI - 10.2307/3325282
Subject(s) - discounting , cost–benefit analysis , business , natural resource economics , public economics , economics , actuarial science , finance , political science , law
This paper develops a two‐stage procedure for discounting the benefits and costs of environmental regulations that is a variant of the shadow price of capital approach. Under this approach, the capital costs imposed by a regulation are annualized using the marginal rate of return on capital and then both benefits and costs are discounted using the social rate of time preference. This approach yields results that differ significantly from those of conventional discounting when benefits occur with a substantial lag or when benefits are long term.