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Environmental and Resource Economics

, Volume 61, Issue 2, pp 273–296 | Cite as

Ramsey Discounting of Ecosystem Services

  • Stefan BaumgärtnerEmail author
  • Alexandra M. Klein
  • Denise Thiel
  • Klara Winkler
Article

Abstract

Most ecosystem services, which are essential for human well-being, are globally declining, while the production of consumption goods, measured by GDP, is still growing. To adequately account for this opposite development in public cost-benefit analyses, it has been proposed—based on a two-goods extension of the Ramsey growth model—to apply good-specific discount rates for manufactured consumption goods and for ecosystem services. Using empirical data for ten ecosystem services across five countries and the world at large, we estimated the difference between the discount rates for ecosystem services and for manufactured consumption goods. In a conservative estimate, we found that ecosystem services in all countries should be discounted at rates that are significantly lower than the ones for manufactured consumption goods. On global average, ecosystem services should be discounted at a rate that is 0.9 \(\pm \) 0.3 %-points lower than the one for manufactured consumption goods. The difference is larger in less developed countries and smaller in more developed countries. This result supports and substantiates the suggestion that public cost-benefit-analyses should use country-specific dual discount rates—one for manufactured consumption goods and one for ecosystem services.

Keywords

Discounting Ecosystem services (De)growth  Heterogeneous consumption Relative scarcities Ramsey model  Substitution 

JEL Classification

H43 Q28 Q51 Q57 

Notes

Acknowledgments

We are grateful to Dave Abson, Kjell Brekke, Simon Dietz, Moritz Drupp, Charles Figuières, Monica Hernández, Terry Iverson, Larry Karp, Duncan Knowler, Vincent Martinet, David Pannell, Jack Pezzey, Martin F. Quaas and Michael Rauscher for discussion and comments.

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Copyright information

© Springer Science+Business Media Dordrecht 2014

Authors and Affiliations

  • Stefan Baumgärtner
    • 1
    Email author
  • Alexandra M. Klein
    • 2
    • 3
  • Denise Thiel
    • 1
    • 4
  • Klara Winkler
    • 1
    • 5
  1. 1.Sustainability Economics GroupLeuphana University of LüneburgLüneburgGermany
  2. 2.Institute of Ecology, Leuphana University of LüneburgLüneburgGermany
  3. 3.University of FreiburgFreiburgGermany
  4. 4.University of Life SciencesViennaAustria
  5. 5.Lund UniversityLundSweden

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