While the core NPV analysis applied a real social discount rate of 4 percent, in keeping with Danish government guidance, emissions and electricity prices were based on costs of capital that differed from this rate, as did the annuity rate applied in the financial analysis of the project. While the different rates are carefully justified in each setting, we question whether there is consistency in the approach taken to intergenerational welfare across different steps of the analysis. The use of high corporate rates in some contexts potentially makes it more difficult for Green Transition projects to meet the legal requirement of being evaluated as socio-economically optimal.
Authors:
Mark C. Freeman, Frikk Nesje, Daniel Møller Sneum and Emilie Rosenlund Soysal