The paper "Economics of the Environment" is a wonderful example of an assignment on macro and microeconomics. Many economists believe that cost-benefit analysis needs to use some positive discount rates to every cost and benefit. They also believed that less value needs to be placed on benefits received in the future than the ones that are being presently received. They preferred incurring costs in the future rather than the present. Several economists argue that current generations have the ethical duty to protect future generations’ interest because the future generations are the recipients of benefits and are not yet born.
They cannot also express their preferences (Hussen, 2008). A more hopeful counterargument is that investments created in the economy currently are expected to enhance the future wealth of the descendants, offering them a huge scope of exercising any environmental protection preferences, as long as environmental harm is reversible. The argument, therefore, follows that a zero discount rate ensures intergenerational fairness by preventing the current generations from assuming the long-term environmental and other costs of present-day economic activity. Utilitarian and several other economists have proceeded with this argument one step ahead.
They argue that discounting is morally indefensible and is a respectful expression for capacity. Proponents of zero discount rate argue that discounting can completely devalue the economic impact of even disastrous environmental events happening outside a 50-year time limit. For instance, the current value of a disastrous event happening fifty years from now can be valued at less than one percent of its future value. The moral argument against discounting is convincing, however, the prevalence of inflation, opportunity cost of capital, and time preference propose that a positive discount rate reflects well societal preferences (Asafu-Adjaye, 2005). Question 2 Garnaut's review has been criticized for the use of low discount rates.
It has been argued many scholars that the discount rates applied in the Garnaut review were unfairly low. The selection of discount rates is essential to judgments created in the review. Any rate that is materially higher than two in the review can cause the results on strong improvement to be less clear-cut. It is therefore important to explore the critique. According to Garnaut (2008), some scholars argue that future generations can be better off and that discount rates that are low can fail to discount for future incomes properly.
Smith, K., 2011, Discounting, risk and uncertainty in economic appraisals of climate change policy: comparing Nordhaus, Garnaut and Stern. Retrieved May 9, 2011 from
Garnaut, R., 2011, weighing the costs and benefits of climate change action, Retrieved May 9, 2011 from
Garnaut, R., 2010, What if mainstream science is right? the rout of knowledge and analysis in australian climate change policy (and a chance of recovery?), Retrieved May 9, 2011 from
Garnaut, R., 2008, Adaptation and mitigation measures for Australia, Retrieved May 9, 2011 from
Hussen A., 2008, Principles of environmental economics, Routledge: London.
Asafu-Adjaye J., 2005, Environmental economics for non-economists: techniques and policies for sustainable development, World Scientific: New York.
Revesz R., & Sands P., 2008, Environmental Law, the Economy and Sustainable Development: The United States, the European Union and the International Community, Cambridge University Press: Cambridge.
Tisdell, C., 2009, Resource and environmental economics: modern issues and applications, World Scientific: New York.