Environmental Discount Rate and Energy Transition. An Application for Germany

The achievement of climate neutrality objectives must be guided by long-term policies. It is worth mentioning the projects of the European Green Deal with objectives for 2050 and the investment strategies aimed at containing global warming, the repercussions of which manifest themselves for decades. In assessing the sustain-ability of these policies, a central role is played by the Social Discount Rate: the greater its value, the less importance is attributed to the project’s effects that are progressively further away over time. The use of constant discount rates, generally used in practice, exacerbates the effect of reducing the present value of future costs and benefits, which are thus underestimated. The aim of the work is to demon-strate how the use of innovative, dual and declining approaches allow to take into account the problems of intergenerational equity, typical of investment projects for the ecological transition. This approach is called dual because it is based on the use of discount rates which, for the actualization of environmental externalities, are different from the rates that weigh strictly financial components. Both economic and environ-mental discount rates have a declining structure for projects with long-term effects. The analysis model, which defines environmental quality as a function of energy indicators, is implemented to estimate both economic and environmental declining discount rates for Germany, the main European economy. The results obtained, also compared with those already obtained for other economies, show that the use of environmental discount rates can affect the process of allocating resources for energy policy interventions.