Dynamic EfficiencySlides (html) [link]
- Read Keohane and Olmstead (KO) Chapter 2 pp 30-34
- Read the New York Times “Climate Change FAQ”
- What do you think the most important damages of unmitigated climate change are? (list 1-2) Do you think these effects will primarily be felt now or more so in the future?
- What are some of the main costs of mitigating climate change? If serious climate change is to be avoided, will these costs largely be paid now or in the future?
- CRS videos on Discounting and Net Present Value Analysis
- BH Chapter 15 - Discounting on canvas
- For a more technical summary of current climate science, see the IPCC’s recently released Sixth Assessment Report. NY Times summary here.
- MIT Climate Science and Climate Risk Primer. Older, pdf verion here
- When benefits and costs span time, we need to put them in present value terms in order to compute net benefits.
- You should be comfortable using the present value formula, translating benefits and costs occurring at different times into comparable units.
- For government policy, it is not obvious what the appropriate discount rate is. Ramsey (1928) provides a transparent formula.
- Climate change is a good example of a policy problem where the choice of discount rate matters a lot. This is because CO2 is a stock pollutant.