Social discounting of large dams with climate change uncertainty

摘要: It has long been known that the economic assessment of large projects is sensitive to assumptions about discounting future costs and benefits. Projects require high upfront investments take years begin producing benefits can be difficult justify with discount rates typically used for project appraisal. While most economists argue social should below 4%, many international development banks government planning agencies responsible appraisal found using 7-12% or more. These choosing higher account opportunity cost capital. Meanwhile, a new robust debate begun in economics over whether even 3-4% are too context climate change. This paper reviews recent controversy examines its implications an illustrative hydropower Ethiopia. The analysis uses integrated hydro-economic model accounts how dam’s transboundary impacts vary real value dam highly growth. argument investment weakest under conditions global growth, particularly if these coincide unfavourable hydrological factors related project. If however long-term growth reduced, tends increase. There may also distributional local arguments favouring investment, region lags behind rest globe. In such circumstances, seen as form insurance protects vulnerable generations against possibility macroeconomic instability shocks.