HM Treasury

The Dragon Capital Chair organised two workshops to address the issue of whether the Green Book should use a dual discounting approach for ecosystem services as a means of reflecting their increasing scarcity and willingness to pay over time. Keynote speakers were Moritz Drupp (University of Hamburg), Christian Gollier (President of the Toulouse School of Economics) and Anthony Millner (University of California Santa Barbara), all experts in the area of social discounting and environmental economics. The conclusion of the workshop was to reflect increasing scarcity in rising prices for ecosystem services rather than a separate discount rate for ecosystems. This mirrors procedures elsewhere in the Green Book where values are necessarily increasing due to fixed supply or increasing scarcity, such as for the value of time saved, a key variable in the Cost Benefit Analysis of transport projects, for which the price is always assumed to increase at the rate of income growth. The conclusion can be found here, where it was agreed that more research is needed to establish the price schedules for different ecosystem services. The workshop was inspired by work by Venmans and Groom (2021) here, and helped inspire research later funded by the World Bank on relative prices for ecosystems by Drupp, Groom et al. (2023) here. This line of research has culminated in the following article in Science magazine which spells out how the guidelines for Cost Benefit Analysis could be augmented to enable the value of ecosystem services and biodiversity be adjusted to reflect increasing demands and scarcity: Drupp, Groom et al., (2024) here.