What single factor generally is most important in determining the amount of effo

Question

What single factor generally is most important in determining the amount of effort to put into reducing carbon dioxide emissions in the economically optimal path?

The discount rate—for a higher discount rate we should do less now to reduce carbon dioxide emissions

The discount rate—for a lower discount rate, we should do less now to reduce carbon dioxide emissions.

The interest rate—for a lower interest rate, we should do less now to reduce carbon dioxide emissions

The pure rate of time preference—for a lower pure rate of time preference, we should do less now to reduce carbon dioxide emissions

The interest rate—people who are less interested in economics should spend all their time trying to reduce carbon dioxide emissions

Explanation / Answer

Option 4

Pure rate of time preferences tells about the individual’s utility function which captures the trade off between today’s consumption and consumption in the future. Using the pure rate of time preferences actions towards fractional reductions in Co2 emissions can be undertaken.

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