> Tom Fiddaman, using just CO2 and ignoring ocean acidification,
> suggests ... a discount rate of 1--2%.
The difference between a one year CO2 pulse and addition over 70 years
is interesting, but I am not sure how he relates it to discount rates.
I've got a big logical problem with using discount rates to work out
how much should be spent today to save future generations some costly
damage, as I've alluded to in my previous post. A discount rate above
0 discounts far future generations to nothing, but a discount rate of
0 means a small annual damage incurred by a huge number of future
generations would justify spending all our resources today, leaving
our own generation nothing to live on.
Surely how much deprivation the spending means today has to figure
somehow?
Put differently, I am happy to put money I don't need into an account
that pays 0% interest. But even 100% interest isn't going to interest
me, if I am asked to deposit the money I need to buy food to survive.
------------------------
Climate change economics boils down in practise to considerations like
"I'll buy a smaller car and I'll have done my bit to save those cute
polar bears."
And that's the way it should be I suppose, we compare in simple terms
what we give up for our climate change investment and what we get
back, and then judge whether the sacrifice is worth it. It's just that
when I look at climate change economics, I do it with some awe for the
real power of compound interest, and with a belief that there are many
real investment opportunities with huge returns today.
Do you see what I am driving at? Just because some people use discount
rates in silly ways doesn't mean we should throw the baby out with the
bath water and deny that there are real investment opportunities with
returns well above zero and powerful compounding opportunities, and
that this needs to figure in our decision making.
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