The Choice of Discount Rate for Climate Change Evaluation

Thumbnail Image

Files

bachelor_Nguyen_Anh_Thu_2023.pdf (548.8 KB)

URL

Journal Title

Journal ISSN

Volume Title

School of Business | Bachelor's thesis
Unless otherwise stated, all rights belong to the author. You may download, display and print this publication for Your own personal use. Commercial use is prohibited.

Authors

Date

2023

Department

Taloustieteen laitos

Major/Subject

Mcode

Degree programme

Bachelor’s programme in Economics

Language

en

Pages

25

Series

Abstract

This paper gives insight into the Ramsey Growth Model and the DICE model to enhance the comprehension of the complexities associated with assessing current and future values of economic and environmental factors. The discount rate, a key concept in economic analysis, serves as a tool for evaluating the opportunity costs in making informed decisions about resource allocation. The Ramsey growth model, including elements such as the utility discount rate, the elasticity of marginal utility, and the expected growth rate of consumption, provides insights into intertemporal decision-making and its implications for economic growth. The analysis of the DICE model, particularly its objective function, methodology, and the application of various discount rates, illustrates the inherent complexity in modeling the interaction between economic development and environmental sustainability. The comparison between William Nordhaus's and Nicholas Stern's discount rates highlights the ongoing debate and divergent perspectives on how to integrate ethical and environmental considerations into economic assessments. Achieving a balance between economic advancement and environmental factors necessitates careful consideration of various elements of the discount rates.

Description

Thesis advisor

Murto, Pauli

Keywords

discount rate, climate change, Ramsey model, DICE model

Other note

Citation

Permanent link to this item

https://urn.fi/URN:NBN:fi:aalto-202401281925

Collections

[kand] Kauppakorkeakoulu / BIZ (Open Access)