From the environmental debt to the environmental loan: trends and future challenges for intergenerational discounting
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From the environmental debt to the environmental loan: trends and future challenges for intergenerational discounting Marta Bottero • Valentina Ferretti • Giulio Mondini
Received: 10 December 2012 / Accepted: 19 March 2013 / Published online: 2 April 2013 Springer Science+Business Media Dordrecht 2013
Abstract It is well known that the incorporation of the intergenerational equity objective has turned the traditional Cost–Benefit Analysis (CBA) approach into an obsolete tool for the evaluation of certain types of projects, particularly those exhibiting many environmental externalities and those whose effects extend throughout a long period of time. Two main changes are taking place in CBA in order to adapt this methodology to the sustainable development paradigm: (a) the development of new tools for the economic valuation of environmental externalities that were traditionally left out of the analysis; and (b) an in-depth revision of the theoretical foundations underlying the traditional approaches to discounting, since the repercussions of decisions that are presently being debated will extend to a distant future (in some cases for centuries), whereas in the classical CBA, we deal with few decades at best. This paper aims at investigating the discounting operation in CBA, trying to summarize the main approaches available in the literature, with specific reference to the tools which allow future generations to be included in the analysis. In order to support the theoretical explanation, a real case study is analysed concerning the evaluation of a waste incinerator that has been constructed in the Province of Turin (Italy). Keywords Environmental damage Discount rate Cost–Benefit Analysis Loan Sustainable development
M. Bottero (&) V. Ferretti G. Mondini Department of Regional and Urban Studies and Planning (DIST), Politecnico di Torino, Castello del Valentino, viale Mattioli 39, 10125 Turin, Italy e-mail: [email protected] V. Ferretti e-mail: [email protected] G. Mondini e-mail: [email protected]
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1 Introduction The relationships between human economies and natural ecosystems have been investigated over the last years in the scientific context of ecological economics, which is a multidisciplinary and interdisciplinary field of research (Pearce and Turner 1990). In the general domain of ecological economics, a very important role is played by the evaluation of the environmental damage. Environmental damage is considered as a worsening in the well-being produced by public goods, and its evaluation is normally addressed through the paradigm of the environmental resilience (Fig. 1). Generally speaking the environmental resilience can be defined as the capacity of an ecosystem to respond to a perturbation or disturbance by resisting damage and recovering quickly. Following this reasoning, it is important to define specific thresholds beyond which the natural system is not able to recover, and thus, irreversible changes and degraded conditions take plac
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