Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Stern uses an 0.1% year-on-year discount rate. You can calculate what this does to the 1000 rand/dollar banknote. What the discount rate does is downgrade damages and benefits in the future. Now, while the banknote might become worth less, presumably people, wildlife, ecosystems, real estate, etcetera won't become worth less. So the use of the discount rate in cost-benefit models of climate change is a highly contentious issue.

See this old NYT article on the topic.

by nanne (zwaerdenmaecker@gmail.com) on Fri Jun 22nd, 2007 at 05:10:51 AM EST
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That's just a 10.5% rate of inflation after a century.

Can the last politician to go out the revolving door please turn the lights off?
by Carrie (migeru at eurotrib dot com) on Fri Jun 22nd, 2007 at 05:22:55 AM EST
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Thanks :-)

Now if you look at the areas where climate change will cause damages, you have to ask whether these are subject to inflation at all, or if they'd sooner become worth more.

The discount rate, in other words, needs to be deconstructed.

by nanne (zwaerdenmaecker@gmail.com) on Fri Jun 22nd, 2007 at 05:44:28 AM EST
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