A review on the handling of discounting in eco-efficiency analysis

Abstract

Abstract: Decisions on measures reducing environmental damage or improving environmental impact are usually constrained by financial limitations. Eco-efficiency analysis has emerged as a practical decision support tool by integrating environmental and economic performance. Environmental impact, as well as economic revenues and expenses, are usually distributed over a certain time scale. The temporal distribution of economic data is frequently assessed by discounting while discounting of environmental impact is rather uncommon. The scope of this paper is to reveal if this assumed inconsistency is common in eco-efficiency assessment literature, what reasons and interrelations with indicators exist and what solutions are proposed. Therefore, a systematic literature review is conducted and 35 publications are assessed. Theoretical eco-efficiency definitions and applied eco-efficiency indicators, as well as applied environmental and economic assessment methods, are compared here, but it is revealed that none of the empirical literature findings applied or discussed environmental discounting. It was, however, found in methodical literature. It is concluded that the theoretical foundation for the application of discounting on environmental impact is still insufficient and that even the theoretical foundation of economic discounting in studies is often poor. Further research and, eventually, a practical framework for environmental discounting would be beneficial for better-founded, more “eco-efficient” decisions. Graphical Abstract: [Figure not available: see fulltext.].