chapter  20
Determination of the discount rate
Pages 12

When evaluating construction projects in terms of their environmental impact, due consideration needs to be given to all the costs and benefits that flow from the decision over the life of the project. This immediately raises the question of how to equate costs and benefits that occur in different time periods. Discounting is a technique that has been developed to adjust for the effects of time by recognizing a preference for events that occur in the near future over events that occur in the far future. The rate of discount used is critical to the evaluation process and the validity of the outcome. There is a clear connection between the environmental crisis, economic development, the need for such development to be sustainable and the role that discounting plays in the determination of equivalent value.