DISCOUNT RATE ECONOMICS
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Discounting of natural resources is the equal treatment of generations in relation to the use
of natural resources. For example, this perspective suggests it would be unfair to place to place a
discount rate on water as a natural resource as since present generations might receive a greater
allocation to future generations. Arguably, placing discount rate on natural resources allows for
more accurate planning and analysis of projects like water projects. However, conflict arise when
user groups are excluded from participating in the management of the natural resources. Moreover,
these conflicts occur when there is misunderstanding of these policies and programs.
Discounting rates are the rates at which society in general is willing to trade of its current
resources at the expense of future benefits. The cost applied in dealing with present factors that
affect the viability of the environment and resources by human beings is from the public.
Therefore, the policies put to implement the conservation should be generally agreed on by the
community. For this reason, application of discount rate is used to convert future benefits or costs
into an estimate of present value. It reflects on the tradeoffs between present and future events and
has enormous impact on damage assessment. The higher the rate of discount applied in the
calculation of present value the less pressure assigned to future expectations.
The conservation of natural environment therefore requires clear and well implemented
discounting rates. This ensures no conflict arises in the use of the natural resources and how
different communities and governments disperse the natural resources. It is therefore important
that the communities put in use discounting rate in the analysis of future benefits that may arise
from the use of natural resources.
