The Discount Rate for Assessing Intragenerational Natural Resource Damages

Abstract

Abstract For more than 20 years, economists have converted annual losses from injuries to natural resources caused by oil spills or hazardous-substance releases into their present-value equivalents using a 3% real discount rate. A 1999 technical paper from the National Oceanic and Atmospheric Administration provided three data series from 1981 through 1998 supporting a 3% real discount rate. However, data series for 1981 through 2016, which provide a proxy for the social rate of time preference for consumption by the public, support a lower discount rate. Furthermore, recent conceptual developments imply a lower discount rate for environmental services than for produced goods and services. We present several lines of evidence that support a real discount rate of not more than 2% for assessing intragenerational natural resource damages.