From the environmental debt to the environmental loan: trends and future challenges for intergenerational discounting

Marta Bottero (), Valentina Ferretti () and Giulio Mondini ()

Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, 2013, vol. 15, issue 6, 1623-1644

Abstract: It is well known that the incorporation of the intergenerational equity objective has turned the traditional Cost–Benefit Analysis (CBA) approach into an obsolete tool for the evaluation of certain types of projects, particularly those exhibiting many environmental externalities and those whose effects extend throughout a long period of time. Two main changes are taking place in CBA in order to adapt this methodology to the sustainable development paradigm: (a) the development of new tools for the economic valuation of environmental externalities that were traditionally left out of the analysis; and (b) an in-depth revision of the theoretical foundations underlying the traditional approaches to discounting, since the repercussions of decisions that are presently being debated will extend to a distant future (in some cases for centuries), whereas in the classical CBA, we deal with few decades at best. This paper aims at investigating the discounting operation in CBA, trying to summarize the main approaches available in the literature, with specific reference to the tools which allow future generations to be included in the analysis. In order to support the theoretical explanation, a real case study is analysed concerning the evaluation of a waste incinerator that has been constructed in the Province of Turin (Italy). Copyright Springer Science+Business Media Dordrecht 2013

Keywords: Environmental damage; Discount rate; Cost–Benefit Analysis; Loan; Sustainable development (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1007/s10668-013-9453-1

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