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AbstractDiscounting future costs and benefits is a crucial yet contentious practice in the appraisal of long-term public projects with environmental consequences. The standard approach typically neglects that ecosystem services are not easily substitutable with market goods and often exhibit considerably lower growth rates. Theory has shown that we should either apply differentiated discount rates, such as a lower environmental discount rate, or account for increases in relative scarcity by uplifting environmental values. Some governments already integrate this into their guidance, but empirical evidence is scarce. We provide first comprehensive country-specific evidence, taking Germany as a case study. We estimate growth rates of 15 ecosystem services and the degree of limited substitutability based on a meta-analysis of 36 willingness to pay studies in Germany. We find that the relative price of ecosystem services has increased by more than four percent per year in recent decades. Heterogeneity analyses suggest that relative price changes are most substantial for regulating ecosystem services. Our findings underscore the importance of considering relative price adjustments in governmental project appraisal and environmental-economic accounting.

Discounting future costs and benefits is a crucial yet contentious practice in the appraisal of long-term public projects with environmental consequences. The standard approach typically neglects that ecosystem services are not easily substitutable with manufactured goods and often exhibit considerably lower growth rates. Theory has shown that we should either apply differentiated discount rates, such as a lower environmental discount rate, or account for increases in relative scarcity by uplifting environmental values. Some governments already integrate this into their guidance, but empirical evidence is scarce. We provide first comprehensive country-specific evidence, taking Germany as a case study. We estimate growth rates of 15 ecosystem services and the degree of limited substitutability based on a meta-analysis of 36 willingness to pay studies in Germany. We find that the relative price of ecosystem services has increased by more than four percent per year in recent decades. Heterogeneity analysis suggests that relative price changes are most substantial for regulating ecosystem services. Our findings underscore the importance of considering relative price adjustments in governmental project appraisal and environmental-economic accounting.

We study how the scarcity of non-market goods, such as environmental amenities, affects the economic appraisal of climate policy. To this end, we perform a comprehensive analysis of the change in relative prices of non-market goods in the widespread climate-economy model DICE. We show that DICE already contains relative prices implicitly and that the impact of the scarcity of non-market goods on climate policy evaluation is therefore more pervasive than previously suggested. We calibrate DICE based on empirical evidence and propose a plausible range for relative price changes. The uncertainty is substantial, with relative price changes ranging from 1.3 to 9.6 percent in 2020. For our central calibration, the relative price change amounts to 4.4 percent in 2020. Neglecting relative prices leads to an underestimation of the social cost of carbon in 2020 of more than 40 percent. Accounting for these changes is equivalent to a decrease in pure time preference by more than a half percentage point. Our findings support initiatives to consider relative prices in governmental project appraisal and offer guidance for the evaluation of climate policy.

Understanding what determines the truth-telling of economic agents towards their regulator is of major economic importance from banking to the management of common-pool resources such as European fisheries. By enacting a discard-ban on unwanted fish-catches without increasing monitoring activities, the European Union (EU) depends on fishermen's truth-telling. Using a coin-tossing task in an artefactual mail field experiment with 120 German commercial fishermen, we test whether truth-telling in a baseline setting differs from behavior in two treatments that exploit fishermen's widespread ill-regard of their regulator, the EU. We find, first, that fishermen misreport coin tosses more strongly to their advantage in a treatment where they are faced with the EU flag, and, second, that misreporting is consistent with behavior in other hidden tasks. We also find some supportive evidence for our first result in a conceptual replication with 1200 UK citizens who voted 'leave' in the Brexit referendum. Our findings imply that lying is more extensive towards an ill-regarded regulator and that policy needs to account for this endogenously eroding honesty base.

Understanding what determines the extent to which economic agents tell the truth to their regulating authority is of major economic importance, from banking to environmental protection. To this end, we examine truth-telling of German commercial fishermen in an artefactual field experiment. Their regulator, the European Union (EU), has recently enacted a ban on discarding unwanted fish catches to the sea, without yet increasing monitoring activities. The regulator thus depends on fishermen's truth-telling, while standard economic theory predicts substantial self-serving dishonesty. Using a coin- tossing task, we test whether truth-telling in a baseline setting differs from behavior in two treatments that exploit fishermen's widespread ill-regard of the EU. We find that fishermen misreport coin tosses to their advantage, albeit to a lesser extent than standard theory predicts. Misreporting is stronger among fishermen in a treatment where they are faced with the EU flag, suggesting that lying towards their ill-regarded regulator is more substantial. Yet, some fishermen are more honest in a control treatment where the source of EU research funding is revealed additionally. Our findings imply that regulators can influence truth-telling behavior by means of their regulatory approaches and communication strategies.