Discounting Climate Change Mitigating Projects : A Production-Based Model with Disasters

This paper proposes a model that sheds light on the appropriate discount rate on projects that mitigate climate change. In addition, it helps determine the best time to start implementing climate policy. The model is production-based and features endogenous climate-related disasters. It suggests (1) that the discount rate on climate change mitigation projects is lower than that on the risk-free rate and (2) that it is optimal to start investing in climate change mitigation projects as soon as possible