ABSTRACT

The overarching questions of the impacts of climate change and their mitigation involve long time horizons. In this context, risk and uncertainty are more about the potential damages caused by climate change and, thus, humanity’s insufficient commitment to emission reduction and removal. The frameworks and tools used to deal with risk and uncertainty in the past may be obsolete or even irrelevant. On the production side, governments manage as much as 73% of the world’s forests and, therefore, government investments are a crucial part of any forest sector solution to the climate crisis. Moreover, the government’s role in controlling the damages of climate change impose the challenge of proper discounting in assessing the costs and benefits of its mitigation. Converging and convincing arguments favor using a social discounting scheme—starting with a modest rate and letting it gradually decline as the time horizon becomes longer. This deviates from the high and constant rate commonly used in commercial discounting, but different approaches to discounting are not inherently contradictory. Rather, they can be understood if we consider the different investments in terms of their intrinsic characteristics, including domains, missions, and maturities.