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Climate discounting: How do you value one tonne of CO2eq averted today versus (say) 30 years from now?

by Sanjay1 min read12th Feb 20203 comments

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Temporal discountingClimate change
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Climate discounting: How do you value one tonne of CO2eq averted today versus one tonne of CO2eq averted (say) 10 or 30 or 50 years from now?

Some (potentially overlapping) factors which should be considered:

  • what does warming effect as a function of CO2eq concentration look like? (presumably it's not linear, i.e. presumably the warming effect of another tonne when CO2 is 412 ppm is not the same as the marginal effect when CO2 is 500ppm or 1000pm)
  • what does "badness" as a function of warming look like? (again, presumably not linear, i.e. I suspect that 10 degrees of warming is probably more than 5x worse than 2 degrees of warming)
  • are there vicious circle/runaway effects?
  • are there cliff-edge effects?
  • how much uncertainty is there in the models? (I understand the answer to be "lots", in which case should that make us more risk averse, and therefore more prone to place greater value on immediate results)
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Note: this question was also cross-posted to the Facebook effective environmentalism group https://www.facebook.com/groups/effectiveenvironmentalism/permalink/2306369839662729/

I did a crude calculation in DICE2016R, which doesn't take into account a wide range of effects nor most of the points in my comment below about elasticity. In terms of damage to the economy, the social cost of carbon for 10 years, 20 years and 30 years is about $5, $10 and $14, verses a current total social cost of carbon of $37. This is just taking the social cost of carbon now minus the discounted social cost of carbon in the future for the optimised development pathway. It's about an order of magnitude lower in the non-optimised (baseline) pathway for DICE. General disagreement over the social cost of carbon between models may make this vary over orders of magnitude and the DICE model is low compared to models like PAGE.

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For most reasonable emissions pathways, temperature and linked physical effects depend only on cumulative emissions*. Delaying a given emission by some time therefore does not impact the amount of climate change it causes, so from a climate-focused perspective we don’t see any change in the harm of emissions with time (this may not be true at very low net emissions rates but is at rates similar to present-day). This would mean that the only time delaying emissions would have any climatic benefit would be if they are delayed until a time when net emissions are negative (in which case the world experiences a lower peak cumulative emissions than it would do when emitting without the delay, which we assume is less bad). It’s not clear if and when this will happen, and climate-based discounting would be 0 before that point.

This suggests that for all climatic 'badness functions' (effects on humans/ecology) no discounting is needed, however this may depend on the rate of change as well as the state of the system, and human impacts may also depend human development, equality and preparation for climate change. As we hope that the rate of emission will begin to decrease soon, this would mean that delayed emissions might be less impactful in the future. It’s going to be very assumption/IAM-dependent as to how much though. It's also not clear that this generates a positive discount rate - it's possible that people seeing more climate change sooner incentivises more research/investment in averting it, which takes time to pay off.

It’s important to distinguish two different factors that could be relevant when discussing this – one is the social cost of carbon (potentially measured in money lost, or in more egalitarian DALY losses), the other is the carbon market value of carbon. If one assumes the existence of a well-functioning global carbon market, then emissions at times after this may be largely absorbed by elasticity. However at times prior to this/if the market is not comprehensive, the ‘offsetting’ may be just displacing consumption.

A lower limit on the discount rate could come from the probability of catastrophic events (which may be a function of pure time, carbon concentration and derivative of concentration). In the event of a nuclear war, meteorite impact etc. our climate may no longer be determined primarily by emissions concentrations, hence carbon released after this period is of lower importance.

\* https://www.nature.com/articles/nature08019,

\* https://agupubs.onlinelibrary.wiley.com/doi/pdf/10.1029/2019EF001312?fbclid=IwAR3nOrAs0l_WT6y7GibtOK-OYlktegmhaerDDu2_gArXh-lGZRT0ZzT8wFA