Campus Sustainability Office

Discount Rates

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Discount rates are used to determine the present and future values of resources. Buying commodities through the futures exchange is a good example of this. Higher discount rates discount future values relative to present values and, therefore encourage exploitation (extraction or harvest) in the present rather than delaying for a future date. When comparing a scenario between renewable and nonrenewable energy resources, high discount rates can result in a propensity to over-invest in fossil fuel energy over renewable energy (see Gillingham and Sweeney 2010:12).

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