Embedded Discounting

Arbeitspapier

The appraisal of public investments is subject to formal guidelines which often require input prices, such as forecasted energy prices. Using Danish guidelines as a case study, we explore the discounting assumptions in these input prices and find rates ranging from 2.97% to 17.5%, markedly different from the headline discount rate of 3.5%. This is not unique to Denmark and discrepancy in embedded discount rates can lead to false rejection of projects. We offer three possible explanations for such differences, based on positions on how the discount rate should be set.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 10689

Classification and Topics

• Classification: Wirtschaft ; Allocative Efficiency; Cost-Benefit Analysis ; Project Evaluation; Social Discount Rate ; Economics of Regulation ; Energy: Government Policy
• Subject: discounting ; social discount rate ; cost-benefit analysis ; public guidelines

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Sneum, Daniel Møller ; Soysal, Emilie Rosenlund ; Nesje, Frikk ; Freeman, Mark C.
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/282377
• Last update: 10.03.2025, 11:42 AM CET