Ethics, Climate Change, and the role of Discounting

a project within the climate change workstream of the Human Rights for Future Generations Programme

The issue of discounting has loomed large in recent discussions of the cost-effectiveness of climate change mitigation because, thanks to the fact that many of the largest costs and potential benefits involved occur in the far future, analyses of mitigation policy are extremely sensitive to the choice of discount rate.

Hilary Greaves' has written a review article (for WIREs Climate Change) that examines discussions in economics and moral philosophy of the discount rate, with a particular focus on climate change. Greaves' article covers the Ramsey-equation approach to discounting, its relationship to rates of return on capital and credit-market interest rates, determination of the values of the parameters in the Ramsey equation (including the controversial the 'rate of pure time preference'), the impact of various sorts of uncertainty on the analysis, and the way in which this debate has played out in the recent climate change discussions. A draft is available via Greaves' personal webpage. Dominic Roser, together with Matthew Rendall, is currently setting up a workshop and a public lecture on the ethics and economics of discounting. This is to be held in early 2016.