Discount Rate Simulation Spreadsheet (CORE Econ)

The Challenge of Maintaining Collusion

A government is evaluating a major climate mitigation project that costs $50 billion today but is projected to prevent $1 trillion in environmental damages 100 years in the future. Advisor X recommends using a 1.4% rate to evaluate the future benefits, while Advisor Y recommends a 4.3% rate. Based on this information, which of the following conclusions is most likely correct?

Evaluating Climate Investment Strategies

Match each economic approach to valuing future climate change impacts with its corresponding characteristic and policy implication.

Discount Rates and Climate Policy Urgency

An economist who is highly concerned about the welfare of future generations and believes in taking strong, immediate action on climate change would likely advocate for a high discount rate when evaluating climate policies.

Discount Rates and Carbon Pricing

An environmental project is expected to yield a benefit of $1,000 in 50 years. Using a discount rate of 4.3% per year, the present value of this future benefit is approximately $____. (Round your answer to the nearest whole number and do not include the dollar sign or commas).

Three economic advisors are evaluating the same long-term climate change damage model to recommend a carbon price. They differ only in the annual rate they use to discount future damages. Advisor A uses a rate of 1.4%. Advisor B uses a rate of 4.3%. Advisor C uses a rate of 7.0%. Arrange the resulting carbon price recommendations from highest to lowest.

The Seawall Dilemma: Evaluating Long-Term Investment Advice

Evaluating Climate Investment Strategies

Match each economic approach to valuing future climate change impacts with its corresponding characteristic and policy implication.