(For the calculation, you divide $100 by a figure that is one plus the rate — in these examples 1.03 for a 3 percent discount rate<br />and 1.07 for a 7 percent discount rate — for each of the 100 years, or to the 100th power.)<br />Under the executive order, President Trump appears to be putting us on a path toward valuing<br />climate damages at much less — possibly less than $5 per metric ton of carbon.<br />Investors who had put some portion of their investments in gold — as an insurance policy — reaped the benefits as gold outperformed the stock market by almost 70 percent at exactly the moment<br />that the job market was deteriorating and other investments were declining in value.<br />But if those risks are real, using a low discount rate to choose the degree of climate<br />mitigation today will be like having invested in gold before the Great Recession.<br />But if the risk is potentially disruptive, like a severe recession or worse, then markets<br />point to a lower discount rate, perhaps like gold’s annual average return or even lower.<br />The social cost of carbon, the estimated monetary damages caused by the release of an additional ton of carbon<br />dioxide into the atmosphere, is the linchpin for how the federal government values climate damages.<br />With a discount rate of 3 percent, these damages are worth $5.20 today — that is, we would be willing to pay up to $5.20 to avoid them.
