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Discounting is the process of converting a value received in a future time period (e.g., 1, 10, or even 100 years from now) to an equivalent value received immediately. For example, a dollar received 50 years from now may be valued less than a dollar received today—discounting measures this relative value. The discounting process is a way to convert units of value across time horizons, translating future dollars into today’s dollars. Discounting is used by decisionmakers to fully understand the costs and benefits of policies that have future impacts. This explainer will review the rationale behind discounting, how the discount rate is calculated, and why discounting matters for climate policies.