Discounting and environmental valuation: should dual discount rates be used? and Conclusions and policy implications

The market discount rate, which may be determined from financial time series, is applicable for some of these decisions. Others will have to strive to recoup individual discount rates - rates that also represent the underlying transaction costs of borrowing money that families experience. In this paper, two approaches have been used to calculate discount rate (Wang and Daziano, 2015): (i) the exogenous method, which estimates a discount rate outside the valuation model to calculate the present value of future costs and benefits, and (ii) the endogenous method, in which the discount rate is calculated directly within the valuation model itself, considering it a parameter to be estimated that is dependent on the variation of the time horizon of the benefits or payments