Why is the choice of the social discount rate crucial and often contentious in the economic analysis of long-term environmental projects (e.g., climate change mitigation)?

Solution: The social discount rate is used to convert future costs and benefits into a Present Value (PV). When dealing with long-term problems like climate change (where benefits of mitigation are decades away), a high discount rate drastically shrinks the PV of those future benefits. This makes taking immediate, costly action to combat global warming appear less economically rational than postponing action. Environmentalists and economists (e.g., Stern Review) often argue for a very low or near-zero social discount rate to better reflect inter-generational responsibility.