The social discount rate in cost-benefit analysis for flood risk management: reasoning on the intertemporal preferences [Il saggio sociale di sconto nell’analisi costi-benefici per la gestione del rischio alluvionale: riflessioni sulle preferenze intertemporali]

Abstract

About the Flood Risk Management Plans (PGRA) the European Community (DIR. 2007/60; Regulation No. 1303/2013) introduces the need to provide an assessment of the prevention and mitigation measures for the hydraulic risk through a Cost-Benefit Analysis (CBA), (Cohesion Fund, 2014-2020). Indeed, the CBA helps identifying a priority ranking of structural and non-structural interventions to be implemented so to reduce the probability of flooding and the negative consequences for human health, the environment, cultural heritage and economic activities. In Cost-Benefit Analysis (CBA) application, the Social Discount Rate (SDR) covers a fundamental role in revealing the intergenerational concern and the willingness to pay for environmental protection and debt inheritance of a society into a specific territorial-time dimension. In particular, scientific research on the hydraulic risk area like the national and international guidelines demonstrates no agreement about the methodologies for estimating the SSS and the (SSS) value adopted in different territorial contexts. For this reason, this paper aims at investigating literature debates about SDR effectiveness on a value-based assessment and how it is applied in CBA analysis dealing with intergenerational environmental costs redistribution and human heath protections. The theoretical explanation is supported by applying CBA analysis to the real case study of Olbia city, where relevant flood events occurred in the last fifty years and, in particular, the last one in 2013, causing significant losses in economic welfare and human lives. First results from the empirical application show how the choice of the SSS and the time-frame of the interventions have a strong impact on the effectiveness of the strategic decisions from a social point of view. In particular, these two factors’ influence is more evident in long-term scenarios due to intertemporal prices’ cumulative and multiplicative effects, which reduce future values such as environmental and social benefits if discounted to date.

Keywords

• social discount rate
• cost-benefit analysis
• flood risk management
• intergenerational environmental debt