Cost-Benefit Analysis and the Environment by OECD

Author:OECD
Language: eng
Format: epub
Tags: Governance/Economics/Environment
Publisher: OECD Publishing
Published: 2018-06-24T16:00:00+00:00

The way in which the project is funded is important: i) capital markets; ii) general taxation; iii) foreign loans; iv) user fees; or, v) a mixture of these options.

The SDR can be informed by the social opportunity cost of capital (SOC), risk-free rate of return or social rate of time preference (SRTP)? There are strong arguments for using the SRTP for CEA, SOC when private capital will be displaced and risk-free rates when government borrowing funds the project.

Theoretically, the cost of public funds should be taken into account via estimates of: i) Weighted SOC/risk-free SRTP approach; ii) Shadow price of capital (SPC) approach; or, iii) Deadweight loss of raising funds via taxation.

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