Discount rate: Relevant aspects for environmental normative in Colombia

Abstract

In the Colombian environmental normativity, the discount rate is the main variable that compares the temporal economic valuation of the costs and benefits produced by investment projects. Nevertheless, the established criterion of 12 % does not consider that some environmental impacts could be inter-generational. This paper estimates a specific discount rate (TAD) that integrates sustainability criteria, useful for the appraisal of environmental licenses. The methodological approach was to calculate the Social Rate of Time Preferences for Colombia, as an approximation of TAD during the 2001-2016 period. Due to the yearly widespread results, a declining discount rate with “gamma distribution” is proposed, finding values of 5 %, 4 % and 2 % for the short, medium and long term, respectively. The main conclusion highlights that due to the TAD’s yearly widespread results found, it is possible to propose a decreasing behaviour in the discount rate related with time, which strengthens the importance of future consumption in governmental decisions.