Page:Technical Support Document - Social Cost of Carbon, Methane and Nitrous Oxide Interim Estimates under Executive Order 13990.pdf/21

 of return on inflation adjusted 10-year Treasury Securities over the last 30 years (1991-2020) is 2.0 percent. These rates are not without historic precedent, such that over the last 60 years the inflation adjusted 10-year Treasury Securities is 2.3 percent. Current real rates of returns below 2 percent are expected to persist. The U.S. Congressional Budget Office (CBO) in its September 2020 Long Term Budget Outlook forecasts real rates of return on 10-Year Treasury Securities to average 1.2 percent over the next 30 years (U.S. CBO 2020). This new information suggests that the consumption rate of interest is notably lower than 3 percent. CEA (2017) examined additional forecasts of 10-Year Treasury Securities and data on futures contracts, reaching the conclusion that the appropriate consumption discount rate should be at most 2 percent.

Figure 1: Monthly 10-Year Treasury Security Rates, Inflation-Adjusted



Several surveys have been conducted in recent years to elicit experts’ views on the appropriate discount rates to use in an intergenerational context (e.g., Drupp et al. 2018; Howard and Sylvan 2020). For example, Drupp et al. (2018) offers confirming evidence that the economics profession generally agrees that the appropriate social discount rate is below 3 percent as reflected in the recent trends in data. They surveyed over 200 experts and found a “surprising degree of consensus among experts, with more than three-quarters finding the median risk-free social discount rate of 2 percent acceptable” (Drupp et al. 2018).

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