In making climate change mitigation or adaptation investments today, we need to think about how we value the welfare of future generations compared to our own. Assuming that future generations will be better off than our own, just as we are better off than our ancestors, a common formula for “discounting the future” recommends paying only 5 cents today for every dollar of benefits 100 years from now. This article in the journal the Future of Children describes three reasons to put more value on future benefits. First, other interpretations of preferences or observed data could increase the weight we place on future benefits by as much as a factor of five. Second, future climate change impacts, particularly those related to the loss of environmental amenities that have no close monetary substitutes, could be undervalued. Third, the risk that a warming climate could cause sudden and catastrophic changes that would drastically alter the size of the population could be misunderstood. Ultimately, many choices about how we value future generations’ welfare come down to ethical questions, and many of the decisions we must make come down to societal preferences—and those choices and decisions will be difficult to extract from data or theory.
Nicholas Institute for Environmental Policy Solutions