1. Suppose that a particular emissions reduction strategy will save $25 billion each year in equivalent environmental da

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1 Suppose That A Particular Emissions Reduction Strategy Will Save 25 Billion Each Year In Equivalent Environmental Da 1 (35.27 KiB) Viewed 21 times

1. Suppose that a particular emissions reduction strategy will save $25 billion each year in equivalent environmental damages. It is estimated that the strategy will produce these benefits for an expected duration of 50 years. (a) If the interest rate is 5% (i = 0.05), what is the maximum amount that will be justified to pay for this strategy? (Yani: What is the Present Value of the expected benefits?). (b) How would your answer to part (a) would change if the interest rate was instead 2% (i = 0.02) ? Comment on the effect of interest rates on cost-benefit analyis.