In a Natural Resource Damage Assessment (NRDA), both the damage to resources and the beneficial effects of restoration activities unfold over time, sometimes over a multi-generational period. To allow losses and gains incurred at different times to be balanced against each other and added to total losses and gains, a discount rate is used to reduce each effect to an equivalent impact on a common day, usually the year in which it occurs. adjust. NRD cases are resolved (“base year”).Impact before base year View more +
Nearly all current practice adopts a 3% annual discount rate, which applies to all elements of the NRDA. This rate, unlike many other technical determinants of the NRD that are regularly scrutinized, is a default value that is rarely discussed.
We reviewed the discount rate in NRDA. It provides a conceptual explanation of what discount rates are, how discount rates are measured empirically, and the origin and relevance of the NRDA’s ubiquitous 3% rate. The argument makes clear that the 3% rate rationale is very narrowly applicable to the NRDA, i.e. it has short-term implications for human use and even then needs to be updated for new data. increase. The 3% rate rationale does not apply at all to ecological valuation using habitat and resource equivalence analysis, which is most often used for ecological resource valuation. Furthermore, it has been shown that a suitable discount rate is: (ii) generally for different periods; (iii) differ between human use and ecological resource assessment; and (iv) differ across the various ecological resources assessed. Finally, the nature of NRDA’s public trust calls into question the inclusion of individual impatience in social discount rates that extend across generations. Justice Over Time considerations recognize that impatience (included in the 3% rate) is a form of discrimination based on the timing of an individual’s birth and should not be included in the NRDA discount. See more –