Department of Agricultural and Resource Economics
Sacrifice, discounting and climate policy: five questions
- Author(s): Karp, Larry
- et al.
I provide a selective review of discounting and climate policy. After reviewing evidence on the importance of the discount rate in setting policy, I ask whether standard models tend to exaggerate the sacrifices that the current generation needs to undertake in order to internalize climate damages. I then consider whether the risk of catastrophic damage really overwhelms discounting, in the determination of optimal policy. I revisit the question of how we actually think about the distant future.