How to calculate the ratio of cumulative mitigation cost to GDP ( using the discounted policy cost)?

[Reliefzxc1]

Hello,

I am using GCAM and I have already obtained the discounted policy cost (with a discount rate of 5%). Now I would like to calculate the ratio of cumulative mitigation cost to GDP, but I am not sure about the correct procedure.

1. For policy cost, I confirmed that GCAM uses a 5% discount rate. However, I could not find the reference (base) year for discounting (I suspect it might be 2015). I am concerned that this will affect how GDP should be discounted.

2. It seems that I need to compute the cumulative GDP over the policy implementation period. Should I also apply the same discount rate to annual GDP values before summing them, in order to make the cost-to-GDP ratio consistent?

Could you clarify the correct way to calculate the cumulative mitigation cost as a percentage of GDP in this context?

Thanks in advance! I would be grateful for any help or suggestions from the community.

[fightingGCAM]

Hello, have you solved your problem? I have the same confusion.

[pkyle]

If you query policy cost by period, then you can handle the discounting and addition off-line, in order to guarantee that the same time horizon and discount factors are used, for the numerator (policy cost) and the denominator (GDP). I guess the equation would look something like this:

PolicyCostToGDPRatio = SumOf(PolicyCost_t / (1 + r)^t) / SumOf(GDP_t / (1 + r)^t)