New EPA Document Reveals Sharply Lower Estimate of the Cost of Climate Change
View on The Washington Post website"The EPA also appears to have changed how it is thinking about a key factor called the 'discount rate,' which is central in calculating the social cost of carbon. The discount rate is 'meant to represent the opportunity cost' of spending society’s dollars on fighting climate change, 'rather than what those resources would have otherwise been invested in,' said economist Richard Newell, who co-chaired the National Academy’s report and is president of Resources for the Future."
"The 7 percent rate yields a considerably lower social cost of carbon. But 'there’s good reasons to think that such a high discount rate is inappropriate for use in estimating the social cost of carbon,' Newell said. He explained that when it comes to the impacts of climate change, those generally affect individual consumers where a rate of 3 percent is more appropriate.
'This is a case where we have specific information which points to the use of a consumption rate of interest, and in that case, the use of the 7 percent rate is simply conceptually inappropriate,' Newell said."
