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THE NECESSITY OF SPECIAL DISCOUNTING TREATMENT FOR NATURE TO ASSESS THE FLOW OF INVESTMENTS

https://doi.org/10.24057/2071-9388-2010-3-4-46-53

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Abstract

The purpose of the paper is to justify special natural discount rates in the efficiency assessment of conservation activities. Nowadays, the social rate of discounting suggested by D. Pearce is often used. However, many ecosystem values differ in such aspects as absence of high-grade anthropogenic substitutes and conservative character of natural “technologies”, and consequently simple, not expanded, reproduction. As a result, there exists the need for special discounting rate for non-replaceable production and services restricted in their reprocessing and consumption. This follows from the analysis of a consumer choice trajectory in the course of budget growth over a level at which the maximum of consumption of the limited good is reached. The paper estimates the reduction value for discounting rates for renewable natural resources restricted in regeneration in the special case of individual utility functions of the Cobb-Douglas type and, for a collective consumption, using equal-parts resource sharing among consuming community members. The idea of special discount rates for the production and non-material services of ecosystems is useful both for economic efficiency assessment of nature conservation activities and for calculation of compensations from the activities that adversely affect environment quality.

About the Author

Alexey Kotko

Russian Federation
Museum of Earth Sciences of the Moscow State University, Russian Federation


References

1. Groom, B., Hepburn, C., Koundouri, P., Pearce, D. (2005) Declining discount rates: The long

2. and the short of it. Environmental and Resource Economics, 32 (4), pp. 445–493.

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4. Dryden Press.

5. Pearce, D., Groom, B., Hepburn, C., Koundouri, P. (2003) Valuing the future: Recent advances

6. in social discounting. World Economics, 4 (2), pp. 121–141.


For citation:


Kotko A. THE NECESSITY OF SPECIAL DISCOUNTING TREATMENT FOR NATURE TO ASSESS THE FLOW OF INVESTMENTS. GEOGRAPHY, ENVIRONMENT, SUSTAINABILITY. 2010;3(4):46-53. https://doi.org/10.24057/2071-9388-2010-3-4-46-53

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ISSN 2071-9388 (Print)
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