Appropriate intergenerational discount rate for climate policy

Determine the appropriate discount rate for evaluating the costs and benefits of climate policies across generations.

Background

Integrated-assessment models commonly evaluate climate policies by calculating the present discounted value of future abatement costs and climate damages. The discount rate embodies how present decision-makers assess consequences that occur in later generations.

The paper notes that the choice of discount rate has substantial policy consequences: low rates favor rapid and aggressive emissions reductions, whereas high rates favor more modest and delayed action. Because the literature contains substantial disagreement and no settled choice, the appropriate rate remains an unresolved issue in climate-policy evaluation.