Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook (2020) / Chapter Skim
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Pages 105-111
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From page 105... ...
105 Discount Rates The value of the discount rate can have a large impact on a long-term BCA. Lower discount rates will favor capital-intensive scenarios relative to those that have less capital up front but perhaps more ongoing costs (such as operating and maintenance, or O&M costs)
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From page 106... ...
106 Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change -- Guidebook are called, in the economics literature, the rate of time preference, the risk adjustment of the discount rate, and the social opportunity cost of capital.
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From page 107... ...
Discount Rate Information 107 rescinding its guidance documents in favor of the OMB guidance that uses a higher (7 percent) discount rate than that from the IWG (3 percent)
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108 Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change -- Guidebook Providing a range from $11,378 to $13,942 would encompass • The White House (and U.S.
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Discount Rate Information 109 So, OMB estimates the time preference rate at 3.1 percent and the social opportunity cost of capital to be 7 percent.
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110 Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change -- Guidebook (that exclude carbon dioxide emissions) at 7% and 3%, as recommended by OMB Circular A-94.
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From page 111... ...
Discount Rate Information 111 the analysis. If this approach is taken, the results reflect the difference between the time preference approach, the social opportunity cost of capital approach, and the project and cost/benefit risk-adjusted discount rate approach.
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