Evaluating our Future: The Crucial Role of Discount Rates in European Commission Energy System Modelling
The European Council for an Energy Efficient Economy, eceee, commissioned respected economic consultancy Ecofys to carry out a review of recent literature concerning the European Commission’s use of discount rates in energy system modelling. The report summarises much of that work, and in so doing demonstrates the strong influence that choice of discount rates has on policy design. It also brings evidence of which rates Member States use for individual investment decisions in their own modelling, and gives an account of developments in the Commission’s approach. The report provides a balanced, objective overview of recent expert work in this area and adds up to a compelling case for using lower rates for the important impact assessments that will be carried out in 2016. Arguably this is a prerequisite for both greater transparency in policy-making, and proper application of the “Energy Efficiency First” principle.
The paper was commissioned by the European Council for an Energy Efficient Economy (eceee) with co-funding from ECF. It was presented in the European Parliament in October 2015, at a hearing hosted by MEP Anneleen van Bossuyt, entitled Better regulation. Better impact assessments.”