This post will address two questions. What exactly is the discount rate? Did Sir Nicholas Stern, a former chief economist with the World Bank, use the wrong discount rate in his landmark 2006 report, the Stern Review on the Economics of Climate Change? These may seem like abstruse economic questions, but for analyzing the cost-benefit analysis of climate action -- whether we must act urgently or at leisure -- the discount rate is probably the single most important factor. The discount rate basically represents the so-called time value of money, how much more $100 is worth to us today than …
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