Question

14. The government is debating spending $100 billion today to address climate change. It is estimated that $700b of damages will be averted, but not for 100 years. Critics charge it would be better to invest the money at 5% and then use the proceeds in 100 years to repair the damage from climate change. Are they correct? Are physical and financial capital(machines, stocks and bonds) substitutes for carbon absorbing natural capital?(ecosystems, wetlands, rainforests, peat bogs)

Answer 1

Talking about the finance side of it:

$100 Billion invested at 5% for 100 years will give = $100 * (1.05¹⁰⁰) = $13150.13 Billions which is far greater than $ 700 billions, Hence they are correct.

But as we can say that physical and financial capital can never substitute for carbon absorbing natural capital, Hence we should try to save environment today since investing after 100 years will take another probably 100 years to show the results.

Please do rate me and mention doubts, if any, in the comments section.