William Nordhaus, the designer of the DICE integrated climate and economic model, in the most recent estimate I can find, suggests a discount rate of 4.25% per year:
With the current calibration, the discount rate (or, equivalently, the real return on investment) averages 4¼% per year over the period to 2100. The discount rate is the global average of a lower figure for the United States and a higher figure for other countries and is consistent with estimates in other studies that use US data. (This specification is sometimes called the “descriptive approach” to discounting. The alternative approach, used in ref. 10 and elsewhere, is called the “prescriptive discount rate.” Under this second approach, the discount rate is assumed on a normative basis and determined largely independently of actual market returns on investments.)
Meanwhile, a few conservatives thinktanks have also argued for a discount rate based on past rates of return on investment, and that it should therefore match that listed by the Office of Management and Budget, 7%. They also point to historic returns from the NYSE and S&P 500 being about 7% after adjusting for inflation and taxes.
Is Nordhaus' rate lower simply because he is using global, rather than just US, rates of return on investment? If so, why is this "consistent with estimates in other studies that use US data?" Do these other studies just use different assumptions to find a lower value? And are more recent estimates lower than the 2003 estimate? As he does not cite anything here I was struggling to find a solid justification.