While the “risk-free” interest rate is roughly zero these days, the interest rate to use when discounting payoffs from a public project is the rate of return on investments whose risk profile is similar to that of the public project in question. This is still positive for basically any normal public project.
Yes, governments lower the SDR as the interest rate changes. See for example the US Council of Economic Advisers’s recommendation on this three years ago: https://obamawhitehouse.archives.gov/sites/default/files/page/files/201701_cea_discounting_issue_brief.pdf
While the “risk-free” interest rate is roughly zero these days, the interest rate to use when discounting payoffs from a public project is the rate of return on investments whose risk profile is similar to that of the public project in question. This is still positive for basically any normal public project.