High discount rates by private actors undermine climate change adaptation policies

Francisco Alpizar, Maria Bernedo del Carpio, Roger Cremades, Paul J. Ferraro*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review


Adaptation requires investing now to avoid future damages, and thus adaptation is shaped by discount rates. Although the role of social discount rates in climate policy design has been well documented, the role of private discount rates has been ignored. We illustrate the importance of private discount rates in shaping adaptation investments by empirically demonstrating how household discount rates are negatively correlated with investments in water storage tanks in Central America. High private discount rates are common throughout the world and are a barrier to private adaptation investments. To overcome this barrier, adaptation policies targeted at private actors should ensure that benefits accrue sooner or that costs are lowered or accrue later. Governments or private companies could also offer long-term loans that exploit the differential between the discount rate of the lender and the private borrower.

Original languageEnglish
Article number100488
Number of pages6
JournalClimate Risk Management
Publication statusPublished - 26 Feb 2023


  • Adaptation investment
  • Behaviour
  • Decision making
  • Private discount rates
  • Water storage tanks


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