Why it matters
Environmental projects often have costs now and benefits much later. Discounting makes the time comparison explicit while leaving the ethical choice of rate open to discussion.
A worked example
A £1,000 benefit in ten years has a present value of about £744 at 3%, or £508 at 7%, using annual discounting.
Illustrative example · simplified assumptionsA common mistake
Presenting the selected rate as an ethically neutral fact.
Where the idea needs care
Choosing a social discount rate involves uncertainty and ethical judgements, not just arithmetic. Environmental values may not all be monetary.
Apply the idea
Explain this concept using a different example from your spending, work, business or a policy debate. State what stays fixed and what could change the result.
Sources and further study
Examples and explanations by Alibomics. Numeric illustrations are not current market quotations.