Adressing wellbeing in the long-term: a review of intergeneratioinal equity and dscount rates in climate change analysis
Most government policies give rise to a stream of costs and benefits over time. To evaluate them requires us to compare costs and benefits received in different time periods. That requires choosing a discount rate, which determines the value of future costs and benefits relative to current ones. The choice of discount rate can make a significant difference to whether the present value of a project is positive, and to the relative desirability of alternative projects, especially when costs and benefits accrue at different times and over long periods.