Discounting the benefits and costs of environmental regulations

Jeffrey A. Kolb and Joel D. Scheraga
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Jeffrey A. Kolb: Economist with Sobotka & Co., Inc., Postal: Economist with Sobotka & Co., Inc.
Joel D. Scheraga: Senior Economist with the U.S. Environmental Protection Agency and the National Acid Precipitation Assessment Program, Washington, DC, Postal: Senior Economist with the U.S. Environmental Protection Agency and the National Acid Precipitation Assessment Program, Washington, DC

Journal of Policy Analysis and Management, 1990, vol. 9, issue 3, 381-390

Abstract: 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.

Date: 1990
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:wly:jpamgt:v:9:y:1990:i:3:p:381-390

DOI: 10.2307/3325282

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