The ‘tyranny of discounting’ in economic efficiency evaluation of capital investment projects susceptible to ecological and climatic changes

Abstract

In this article, we consider the question of barriers to increasing investment activity in the Boreal and Arctic regions of Siberia, taking into account the factors of ecological and climatic changes. We investigate the current tendencies of large Russian companies in financing environmental policy measures. This is studied mainly in the dynamic of the ratio of ‘current expenditures to investments’ for environmental protection. It is essential to change the financial preference of remedying environmental damage to one of preventing environmental damage by improving warning technology and conducting research and development. Solving this problem is only possible by dictating a standard discounting procedure based on correcting discount rates, periods of cash flow analysis and regulations of Russian accounting standards regarding expenditures on natural resource development.

Keywords:

• Investing
• Discounting
• Ecological factors
• Climate change

Acknowledgements

The research has been supported by the grant issued in accordance with Resolution of the Government of the Russian Federation No. 220 dated 9 April 2010, under Agreement No. 14.B25.31.0001 with Ministry of Education and Science of the Russian Federation dated 24 June 2013 (BIO-GEO-CLIM).