The debate over which discount rates to use in cost-benefit analysis of climate policy mainly proceeds from two positions: discounted and classic utilitarianism. Discounted utilitarianism offers the counter-intuitive result that we hardly have to protect future generations against climate change. Classic utilitarianism, however, offers the counter-intuitive result that we should reduce our consumption across the board to benefit future generations. The insolvability of this problem arises from the fact that both classic and discounted utilitarianism only allow for a single discount rate for all consequences occurring in the same future year, while our intuitions clearly do distinguish consequences dependent on to whom they befall and how our own present acts are causally involved. Many people hold the moral intuition that we ought to refrain from harming others in bodily integrity and personal property, and ought to compensate them if we were unable to prevent harm. At the same time, people hold the moral intuition that we are under no obligation to improve the wellbeing of others if they are not entitled to such improvements. To regain a reflective equilibrium between these moral intuitions and economic theory we have to accept different discount rates for different situations: a zero consumption rate of interest in the case of cost-benefit analysis of measures to prevent harm to future generations and standard discounting in all other cases. If such a zero consumption rate of interest is applied in cost-benefit analysis, future generations are automatically largely compensated for climate damage that is not mitigated.
