Cherbonnier, Frédéric and Gollier, Christian (2022) Risk-adjusted Social Discount Rates. Energy Journal, vol. 43 (n° 4).

This is the latest version of this item.

[thumbnail of wp_tse_972.pdf]
Download (1MB) | Preview
Identification Number : 10.5547/01956574.43.4.fche


When evaluating public and private investment projects, those that contribute more to the collective risk should be more penalized through an upward adjustment of their discount rate. This paper shows how to estimate the risk-adjusted discount rate for different projects, with applications to the electricity sector. Using the standard framework of consumer theory, we express any investment project's beta in terms of the easier-to-measure price and income elasticities of the goods generated by the project. When considering an investment in production capacity, the beta has a flat term structure, and is positive (negative) for normal (inferior) goods. When considering core infrastructures carrying goods or services, such as energy transmission and distribution assets, the beta has a decreasing term structure with very high values at short horizons for infrastructures facing capacity constraints. We provide a real-case example of a cross-border electricity connection with negative beta for the exporting country.

Item Type: Article
Language: English
Date: October 2022
Refereed: Yes
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 03 Mar 2023 09:44
Last Modified: 18 Jul 2023 12:01
OAI Identifier:

Available Versions of this Item

View Item


Downloads per month over past year