What is the social cost of carbon?

That is one hell of a change! Here’s my question: How valid is the methodology regardless of which number you subscribe to? This is the essential stumbling block when models are used to provide a numerical framework in the present for things that might happen well into the future. In this case, as the author explains, everything depends on the “discount rate” plugged into the model.

Writes the author: “A concept known as the discount rate makes it possible to translate future damages into their present value. In 2009, President Obama convened an interagency working group, of which I was a co-leader, to come up with a uniform method for estimating the social cost of carbon: the resulting number to be used across all federal agencies. Our group chose to emphasize estimates based on a discount rate of 3 percent.”

So now we have the key assumption, based on Commandment No. 2 in my book.

But why did they choose to emphasize estimates with a discount rate of 3 percent?? No explanation is given. Without an explanation, this can’t be a “uniform method” but instead the “preferred” method for this group, a group given lots of power and influence in the last administration. And now we have another group in charge with different preferences and their assumption apparently is a discount rate of 7%.

This isn’t an argument one way or another about the impact of global climate change and what we should be doing about it. I’m simply illuminating how those in charge are able to wield the results of their math models with impunity, unless we all become more engaged in assessing the validity of their methods.

https://www.nytimes.com/…/what-financial-markets-can-teach-…