User:Tortraa/sandbox

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Write about 3 parts: Moral arguments against discounting rates, Discounting in the US, Discounting in other nations

MORALITY OF

Implementation

United States

What rate is used in the united states?

France

What is a declining discount rate and how is it used in france?


Sources;

1. US Discount Rate[1]

2. Other Nations Discount Rates[2]

3. Moral Arguments Against[3]

4. Declining Discount Rates[4]


Main article: Emissions trading
Emissions Trading

In addition to the implementation of command-and-control regulations (as with a carbon tax), governments can also use market-based approaches to mitigate emissions. One such method is emissions trading where governments set the total emissions of all polluters to a maximum and distribute permits, through auction or allocation, that allow entities to emit a portion, typically one ton of carbon dioxide equivalent (CO2e), of the mandated total emissions.[5] In other words, the amount of pollution an entity can emit in an emissions trading system is limited by the number of permits they have. If a polluter wants to increase their emissions, they can only do so after buying permits from those who are willing to sell them.[6] Many economists prefer this method of reducing emissions as it is market based and highly cost effective.[5] That being said, emissions trading alone is not perfect since it fails to place a clear price on emissions. Without this price, emissions prices are volatile due to the supply of permits being fixed, meaning their price is entirely determined by shifts in demand.[7] This uncertainty in price is especially disliked by businesses since it prevents them from investing in abatement technologies with confidence which hinders efforts for mitigating emissions.[7] Regardless, while emissions trading alone has its problems and cannot reduce pollutants to the point of stabilizing the global climate, it remains an important tool for addressing climate change.

Controversy of

Discounting is a relatively controversial issue in both climate change mitigation and environmental economics due to the ethical implications of valuing future generations less than present ones. Non-economists often find it difficult to grapple with the idea that thousands of dollars of future costs and benefits can be valued at less than a cent in the present after discounting.[8] This devaluation can lead to overconsumption and "strategic ignorance" where individuals choose to ignore information that would prevent the overconsumption of resources.[9] Contrary to this, an economist would argue that it is important to use society's resources as efficiently and optimally as possible and allocating resources toward the future contradicts those goals.[10] That being said, not all economists share this opinion as notable economist Frank Ramsey once described discounting as "ethically indefensible."[10]

One root of this controversy can be attributed to the discrepancies between the time scales environmentalists and corporations/governments view the world with. Environmental processes such as the carbonate-silicate cycle and Milankovitch cycles occur on timescales of thousands of years while economic processes, such as infrastructure investments, occur on time scales as short as thirty years. The difference between these two scales makes balancing both interests, sustainability and efficiency, incredibly difficult.[10]

Implementation

Because discounting rates are determined and implemented by individual governments, discounting rates are not unanimous across the globe.[11] They range from percentages as high as 15%, as in the Philippines, to as low as 3%, as in Germany.[11]

United States

Discounting in the United States is a complicated area for policy analysis. The discounting rate is not the same for every government agency. As of 1992, the recommended discounting rate from the Environmental Protection Agency is 2-3% while the Office of Management and Budget recommends a discount rate of 7%.[12][11] Further complicating things, these rates are fluid and change every year depending on the administration.[13]

United Kingdom

The United Kingdom is one of very few governmental bodies that currently use what is known as a declining discount rate.[14] Declining discount rates are gaining popularity due to the fact that they address the uncertainties in economic growth which allows for greater weight to be placed on future benefits, but the extent to this advantage remains to be proven.[15][16]

  1. ^ United States. Office of Management and Budget. (17 September 2003). Regulatory analysis. Executive Office of the President, Office of Management and Budget. OCLC 54768341.
  2. ^ De Guzman, Franklin Liang, Zhihong Lin, Tun Zhuang, Juzhong. Theory and practice in the choice of social discount rate for cost-benefit analysis : a survey (PDF). Asian Development Bank. pp. 17–18. OCLC 836563664.{{cite book}}: CS1 maint: multiple names: authors list (link)
  3. ^ Heal, G. M. (1997). Discounting and climate change (PDF). Columbia Business School, Columbia University. OCLC 760924527.
  4. ^ Cropper, Maureen L.; Freeman, Mark C.; Groom, Ben; Pizer, William A. (2014-05-01). "Declining Discount Rates". American Economic Review. 104 (5): 538–543. doi:10.1257/aer.104.5.538. ISSN 0002-8282.
  5. ^ a b "Cap and Trade: Key Terms Glossary" (PDF). Climate Change 101. Center for Climate and Energy Solutions. January 2011. Archived from the original (PDF) on 2017-10-05. Retrieved 27 October 2014.
  6. ^ "Which is better: carbon tax or cap-and-trade?". Grantham Research Institute on climate change and the environment. Retrieved 2020-03-12.
  7. ^ a b Goulder, Lawrence; Schein, Andrew (August 2013). "Carbon Taxes vs. Cap and Trade: A Critical Review". NBER Working Paper Series. Cambridge, MA.
  8. ^ "The Use of Discount Rates" (PDF). European Commission - European Commission. Retrieved 2020-08-24.{{cite web}}: CS1 maint: url-status (link)
  9. ^ Frederick, Shane; Loewenstein, George; O'Donoghue, Ted (June 2002). "Time Discounting and Time Preference: A Critical Review". Journal of Economic Literature. 40 (2): 351–401. doi:10.1257/002205102320161311. ISSN 0022-0515.
  10. ^ a b c Heal, G. M. (1997). Discounting and climate change (PDF). Columbia Business School, Columbia University. OCLC 760924527.
  11. ^ a b c De Guzman, Franklin Liang, Zhihong Lin, Tun Zhuang, Juzhong. Theory and practice in the choice of social discount rate for cost-benefit analysis : a survey (PDF). Asian Development Bank. pp. 17–18. OCLC 836563664.{{cite book}}: CS1 maint: multiple names: authors list (link)
  12. ^ United States. Office of Management and Budget. (17 September 2003). Regulatory analysis. Executive Office of the President, Office of Management and Budget. OCLC 54768341.
  13. ^ "Budget Assumptions" (PDF). The White House. 5 November 2019. Retrieved 2020-08-24.{{cite web}}: CS1 maint: url-status (link)
  14. ^ Cropper, Maureen L.; Freeman, Mark C.; Groom, Ben; Pizer, William A. (2014-05-01). "Declining Discount Rates". American Economic Review. 104 (5): 538–543. doi:10.1257/aer.104.5.538. ISSN 0002-8282.
  15. ^ Farber, David A. (7 April 2014). "The Case for Declining Discount Rates | The Regulatory Review". www.theregreview.org. Retrieved 2020-08-24.{{cite web}}: CS1 maint: url-status (link)
  16. ^ Groom, Ben; Hepburn, Cameron; Koundouri, Phoebe; Pearce, David (2005-12-01). "Declining Discount Rates: The Long and the Short of it". Environmental and Resource Economics. 32 (4): 445–493. doi:10.1007/s10640-005-4681-y. ISSN 1573-1502.
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