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Discount Rates

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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(CC Image of Wall Street's New York Stock Exchange in New York, New York by Arnoldius (Wikimedia Commons) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons


by Sorby, Coty E last modified Feb 17, 2014 03:13 PM

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