We estimate schedules of declining discount rates for cost benefit analysis in the UK. We highlight the importance of model selection for this task and hence for the evaluation of long-term investments, namely climate change prevention and nuclear build.

In a recent paper, Newell and Pizer (2003) (N&P) build upon Weitzman (1998, 2001) and show how uncertainty about future interest rates leads to ‘certainty equivalent’ forward rates (CER) that decline with the time horizon. Such Declining Discount Rates (DDR’s) have important implications...

Uncertain, yet persistent, real rates of return to capital underpin one argument for using a declining schedule of social discount rates. Yet persistency is only present in approximately the first three-quarters of the time-series of US Treasury bond yields used by Newell and Pizer [37] to...

Uncertain and persistent real interest rates underpin one argument for using a declin- ing term structure of social discount rates in the Expected Net Present Value (ENPV) framework. Despite being controversial, this approach has in uenced both the Inter-Agency Working Group on Cost-Benefit...