Question
Suppose a government economist estimates the costs of meeting the CO2 reduction target from the Paris Agreement will cost the current generation of citizens $1.4
Suppose a government economist estimates the costs of meeting the CO2 reduction target from the Paris Agreement will cost the current generation of citizens $1.4 billion of value today and produce benefits of $0.5 billion for this same group. But it will produce benefits of $3.6 billion for the next generation of tax- payers living 40 years from now. If the generational discount rate is r = .50, 4should the government continue to pursue the policy? (Recall that if a discount rate is r, we discount future costs and benefits at 1/(1 + r).) What are two factors that might make the generational discount rate adopted by the government higher or lower?
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