The social discount rate on climate change: A case study of Part L of Schedule 1 of the UK Building Regulations – conservation of fuel and power

Abstract

Purpose

The aim of this paper is to evaluate the impact of social discount rates on the economic significance of CO₂ mitigation in the benefit‐cost analysis of recent amendments of Building Regulations Part L.

Design/methodology/approach

The benefit of mitigating CO₂ emission by raising the standard of building in amended building regulations is estimated by an integrated‐assessment economic model called DICE at different social discount rates proposed by economists and government.

Findings

The benefit of CO₂ mitigation is highly sensitive to the choice of social discount rate that the value of social discount rate is a crucial factor to decide the economic viability of recent and future amendments of Building Regulations Part L. The more positive the social discount rate used in the benefit‐cost analysis, the less sustainability appears to be because higher discount rate tips the balance in favour of current benefits against future costs.

Research limitations/implications

This paper focuses on the impact of social discount rates on the shadow price of CO₂ emission. Further researches are needed to estimate the private benefits and costs to construct and operate buildings complying with amended Building Regulations Part L so as to produce a solid benefit‐cost analysis on the amendment of the building regulations.

Practical implications

If sustainable development, similar to other traditional investment, is subject to feasibility judgement in a common metric, more attentions are needed to be given by sustainability literature on the issue of discounting.

Originality/value

This paper for the first time evaluates the environmental benefits of amending the Building Regulations and the sensitivity of the benefits to the choice of social discount rates.

Citation

Yu, M.K.W. (2006), "The social discount rate on climate change: A case study of Part L of Schedule 1 of the UK Building Regulations – conservation of fuel and power", Property Management, Vol. 24 No. 2, pp. 144-161. https://doi.org/10.1108/02637470610658023