The Social Discount Rate
The Social Discount Rate (SDR) represents the value we place on the welfare of future generations and consequently the cost that society today should bear for future generations - a low SDR places a similar value on future generations’ welfare as on current ones, a high SDR does the opposite. A high SDR used in policymaking results in much less money being spent on climate action today. An example of different discount rates being used in climate models can be seen in the Stern vs Nordhaus debate, whereas Nordhaus used a high and Stern a low discount rate.
Categories Economic Concepts