Discounting Environmental Goods

Understanding individual discounting behavior of future costs and benefits is critical for designing environmental policy. Although there is some empirical evidence of hyperbolic discounting, others have found that exponential discounting is more accurate when behavioral factors are properly conside...

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Bibliographic Details
Published in:Journal of agricultural and resource economics 2018-05, Vol.43 (2), p.215-232
Main Authors: Green, Gareth P., Richards, Timothy J.
Format: Article
Language:English
Subjects:
Behavior
Carbon offsets
Confounding (Statistics)
Costs
Diminishing marginal utility
Discount rates
Economic models
Environmental Economics and Policy
Environmental impact
Environmental policy
experimental analysis
Experimental methods
exponential discounting
Funding
Greenhouse gases
hyperbolic discounting
Institutional and Behavioral Economics
Research methodology
Water pollution
Water quality
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Summary:Understanding individual discounting behavior of future costs and benefits is critical for designing environmental policy. Although there is some empirical evidence of hyperbolic discounting, others have found that exponential discounting is more accurate when behavioral factors are properly considered. Further, there is little research on how environmental discount rates differ from monetary rates. We use experimental methods to determine how individuals discount monetary and environmental goods. Our findings suggest that individual discounting behavior is approximately exponential, environmental goods are discounted at lower rates than monetary goods, and discount rates vary widely across environmental goods when accounting for appropriate behavioral factors.
ISSN:1068-5502
2327-8285
DOI:10.22004/ag.econ.273447