Estimation Of The Social Discount Rate For Non-Marginal Environmental Damages
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SubjectClimate changes--Analysis; Environmental management--Preferences; Habitat (Ecology)--Extinction
When estimating the costs and benefits of programs to address long-term environmental challenges like climate change, the choice of discount rate often drives the results. The Pure Rate of Time Preference (PTP) used in major analyses have ranged from 0.1% (Stern) to 3% (Nordhaus) or higher. In many studies, high values of PTP are supported by revealed preference information based on marginal changes. However, many of the expected effects of climate change are likely to be non-marginal, including extinction, loss of entire habitat types, and inundation of small nations. We report on efforts to measure PTP for non-marginal changes by asking individuals to choose between protecting all of a particular type of habitat for a fixed number of years, versus a fraction of the habitat indefinitely. Presenting individuals with this trade-off provides a way to assess preferences that is easy for the participant to understand, potentially realistic, and not subject to many of the confounding factors that plague current techniques.
David Courard-Hauri (Mentor)