Adaptation task

Discounting
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Discounting

Economists typically use a discounting function to decrease the importance of costs or benefits occurring further in the future. The most common functional form used for discounting is the exponential one. It is, however, heavily debated which discount rate to apply in that model, with most people arguing a rate somewhere between 0 and 10% being correct. Behavioural research shows that most individuals do not apply an exponential model to their own decisions, so other approaches may be appropriate.
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Economists typically use a discounting function to decrease the importance of costs or benefits occurring further in the future. The most common functional form used for discounting is the exponential one. It is, however, heavily debated which discount rate to apply in that model, with most people arguing a rate somewhere between 0 and 10% being correct. Behavioural research shows that most individuals do not apply an exponential model to their own decisions, but rather a hyperbolic model, in which the difference in value between an event occurring now and occurring one year in the future is much greater than the difference in value between an event occurring one year in the future and occurring two years in the future

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Valuation
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References AP home Glossary

This section is based on the UNEP PROVIA guidance document

Criteria checklist

1. You want to appraise adaptation options.
2. The focus is either on collective actions and there are no conflicting interests of private actors, or the focus is on individual collective actions.
3. Decisions can be formalised.
4. Either the set of options includes only short term ones or residual impacts can not be projected.
5. There are risks are due to current climate variability and the relative costs of outcomes are high.
6. Either (i) the focus is on public decisions, and either (a) indirect outcomes are important and macro-economic modelling has been addressed, or (b) market pricing has been addressed, or (ii) the focus is on private decisions.
7. Outcomes are intertemporal.