analysis because it helps define the strength of the climate response to increasing GHG concentrations in the atmosphere. In addition, the FUND and PAGE models define many of their parameters with probability distributions instead of point estimates. For these two models, the model developers’ default probability distributions are maintained for all parameters other than those superseded by the IWG’s harmonized inputs (i.e., equilibrium climate sensitivity, socioeconomic and emissions scenarios, and discount rates). More information on the uncertain parameters in PAGE and FUND is presented in Appendix C of the 2016 TSD (IWG 2016a).
Finally, based on the review of the literature, the IWG chose discount rates that reflect reasonable judgements under both prescriptive and descriptive approaches to intergenerational discounting. As discussed in the 2010 TSD, in light of disagreement in the literature on the appropriate discount rate to use in this context and uncertainty about how rates may change over time, the IWG selected three certainty-equivalent constant discount rates to span a plausible range: 2.5, 3, and 5 percent per year. However, unlike the approach taken for consolidating results across models and socioeconomic and emissions scenarios, the SC-GHG estimates are not pooled across different discount rates because the range of discount rates reflects both uncertainty and, at least in part, different policy or value judgements.
The outcome of accounting for various sources of uncertainty using the approaches described above is a frequency distribution of the SC-CO2 estimates for emissions occurring in a given year for each of the three discount rates. These frequency distributions reflect the uncertainty around the input parameters for which probability distributions were defined, as well as from the multi-model ensemble and socioeconomic and emissions scenarios where probabilities were implied by the equal weighting assumption. It is important to note that the probability distribution for the SC-GHG calculated using the modeling approach outlined above does not fully characterize uncertainty about the SC-GHG due to impact categories omitted from the models and sources of uncertainty that have not been fully characterized due to data limitations. To name just one example of many known GHG-induced damages omitted in the three IAMs, none of the models include damages associated with ocean acidification, and, therefore, naturally the models do not reflect uncertainty as to the potential severity of those damages.
Figures Figure 2 through Figure 4 present the frequency distribution of the interim SC-CO2, SC-CH4, and SC-N2O estimates, respectively, for emissions in 2020 and for each discount rate. Each distribution represents 150,000 estimates based on 10,000 simulations for each combination of the three models and five socioeconomic and emissions scenarios. In general, the distributions are skewed to the right and have long right tails, which tend to be longer for lower discount rates. To highlight the difference between the impact of the discount rate on the SC-GHG and other quantified sources of uncertainty, the bars below the frequency distributions provide a symmetric representation of quantified variability in the SC-GHG estimates conditioned on each discount rate. The full set of SC-GHG results through 2050 is available on OMB’s website.
As illustrated by the frequency distributions in Figures Figure 2 through Figure 4 , the assumed discount rate plays a critical role in the ultimate estimate of the SC-GHG. As explained in Section 3, this is because GHG emissions today continue to impact society far out into the future, so with a higher discount rate, costs that accrue to future generations are weighted less, resulting in a lower estimate. As discussed in Section 3.1, new data and evidence strongly suggest that the consumption interest rate is likely to be less than 3, near 2 percent or lower.
