In social project appraisal, the policy profile of both distributional welfare weights and the social discount rate has risen considerably in recent years. This fact has important implications for the allocation of funds to social projects and policies in countries, and in unions of countries such as the EU. A key component in the formulae for both welfare weights and the social discount rate is the elasticity of marginal utility of consumption, e. A critical review of existing evidence on e suggests that the UK Treasury's preferred value of unity is too low. New evidence presented in this paper, based on the structure of personal income tax rates, suggests that, on average, for developed countries e is close to 1.4. This particular approach to the estimation of e has previously been under‐utilised by researchers.
The UK became a net importer of gas during 2004 and faces an increasing dependency on imports, yet has very little gas storage capacity. The UKs capacity to import, transport and store gas and liquid natural gas (LNG) has to be improved, requiring greater investment in new gas supply infrastructure. Construction of appropriately sited onshore underground gas storage (UGS) facilities is needed. However, local groups oppose most proposed UGS sites on the grounds of safety, citing the dangers of gas migration and rare fatal events, mostly in America.This paper summarizes 228 reported events of widely varying cause, nature and severity at underground fuel storage (UFS) facilities; the majority at USA SPR facilities. Since UGS was first undertaken in 1915, reports of 13 fatalities, around 72 injured and the evacuation of at least 6700 people are found at UFS sites. Some communities have experienced multiple evacuations. In the context of the danger posed to the general public, three of those killed were staff at two UFS facilities. UGS (including LPG) has led to 10 civilian deaths, 25 injured and c. 1250 evacuated.In other areas of the energy supply chain, casualties are orders of magnitude greater, with at least 1525 dead, 6826 injured and the evacuation of over 7000 at incidents involving above ground fuel storage tanks since 1951. When considering UK UGS applications, the risk of UGS and wider UFS experiences should be put into context. Worldwide, over 90 years experience in UGS now exists, with around 630 facilities of different types currently operational. Technologies used are often those of, or derived from, a well-regulated oil and gas exploration industry. In contrast to public perception, industry and academia recognize that UGS has an excellent health, safety and environmental record. Although it should not be claimed that gas will never be found outside the intended well or storage facility area, UFS casualty figures appear to corroborate claims by supporters of the technologies that salt caverns provide one of the safest answers to the problem of storing large amounts of hydrocarbons and that even in urban areas underground gas storage, oil and gas production can be conducted safely if proper procedures are followed. If gas is found outside the intended system, then after recognition of the problem, mitigation and safe operating procedures can and have been developed.
PurposeThis paper sets out to estimate discount rates for EU members, on a consistent time preference basis, for application in the appraisal of social projects. The value of the discount rate can have an important influence on the allocation of funds between short‐term and long‐term uses.Design/methodology/approachA key component of the social discount rate is the elasticity of marginal utility of consumption (e) and it is estimated from OECD data relating to marginal and average rates of income tax. A tax model based on the principle of equal absolute sacrifice of satisfaction is employed.FindingsThe estimated discount rates, based on social time preference, mostly lie in the range 3‐5.5 per cent. The main source of variation in rates is differential growth in per capita consumption. Estimates of e are reasonably consistent and for 15 of the countries they lie in the range 1.3‐1.6.Research limitations/implicationsFor more comprehensive tax information, then additional data from each country's tax authority are required. The research on estimates of e and social time preference rates can be extended to cover non‐European countries.Practical implicationsIn the interests of a consistent equitable treatment of future generations, member countries of the EU should employ the same methodology in estimating social discount rates.Originality/valueThis paper applies a practical tax‐based approach to the estimation of e for a large number of European countries. The paper will be of interest to academics specialising in welfare economics and to practitioners involved in social project appraisal.
Discounting has been a long-established intertemporal efficiency tool in cost-benefit analysis which focuses on project selection at communal level with a view to maximising the social welfare. However, with the relentless growth in environmental stress that, in good parts, stems from investment projects the established criterion in discounting appears to be inadequate especially when environmental issues are taken into consideration. This paper looks at how dual focus on efficiency and sustainability can be achieved by using dual discounting, i.e. discounting environmental benefits separately and differently from other costs and benefits and applies this alternative criterion to an afforestation scheme in the United Kingdom which contains carbon sequestration in addition to timber benefits.
Social discount rates are estimated for six major economies: Australia, France, Germany, Japan, the UK and the USA. A common methodology based on social time preference is employed and the information required is taken from the same OECD database. The main policy implications of applying consistently measured discount rates in the context of social project appraisal are then discussed. This is an important matter because, up to now, these countries have set their official discount rates using strikingly different methods and such disparities may have resulted in inconsistent decision-making in relation to the allocation of funds to long-term social projects.
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