The Impacts and Costs of Climate Change Page: 26
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The Impacts and Costs of Climate Change
Review of Valuation of Climate Change
Impact studies begin with an inventory of the effects on multiple criteria - typically lives lost, the
burden of disease on humans, species lost, etc. Negotiating global climate change targets has tended
to recognise such multiple effects, in effect corresponding to an informal multi-criteria approach29.
However, a common metric is desirable, if possible, for consistency in policy evaluation on climate
change mitigation. The most common metric is monetary. A monetary metric is particularly well
suited to measure market impacts. For example: the costs of sea level rise could be expressed as the
capital cost of protection and the economic value of land and structures lost in the absence of
protection; agricultural impact can be expressed as costs or benefits to producers and consumers; and
changes in water runoff might be expressed in new flood damage estimates.. Using a monetary metric
to express non-market impacts, such as effects on ecosystems or human health, is more difficult,
though it is possible. There is a broad and established literature on valuation theory and its
application, including studies on the monetary value of lower mortality risk, ecosystems, quality of
life, etc. However, economic valuation, especially in the area of climate change, is often particularly
controversial, because of ecosystem and socially contingent effects, the potential magnitude of major
impacts (include irreversible climate shifts), and because of issues with intergenerational and
international equity. There is also an incomplete understanding of climate change itself. Nonetheless,
there has been considerable research in to this area, and numerous studies have estimated the costs of
climate change. We have summarised the key areas that these studies focus on, along with comments
on valuation, in the box below.
The Social Costs of Climate Change: Key Areas of Assessment in the Literature and the Models
Sea level rise leads to costs of additional protection, or otherwise loss of dry land and wetland loss. The balance
will depend upon future decisions about what protection is justified. Costs of protection are relatively well
known and included in nearly all models, but other costs (rising sea levels increases the likelihood of storm
surges, enforces landward intrusion of salt water and endangers coastal ecosystems and wetlands) are more
uncertain and often excluded (or only partially captured in terms of valuation). Populations that inhabit small
islands and/or low-lying coastal areas are at particular risk of severe social and economic effects from sea-level
rise and storm surges. This raises the issue of migration (e.g. for those living on small island states), the costs of
which depend on diverse social and political factors (so called socially contingent effects) but these are not
captured in the current valuation models.
Energy use impacts will depend on average temperatures and range, but there will be a combination of increases
and decreases in demand for heating (both in terms of overall energy supplied, and to meet peak demands).
Benefits from increased winter temperatures that reduce heating needs may be offset by increases in demand for
summer air conditioning, as average summer temperatures increase. The models capture these effects, although
the reference scenario is difficult to project.
Agricultural impacts depend upon regional changes in temperature and rainfall, as well as atmospheric carbon
dioxide levels (and fertilisation). The key impacts will be to crops and changes in the cultivated area and yields.
These effects depend on many factors and in some areas, the area suitable for cultivation and potential yields will
increase. Climate variability, as well as mean climate change, is an important consideration. Adaptive responses
will be important - choice of crop, development of new cultivars and other technical changes, especially
irrigation (see also water supply below). Most valuation studies capture the direct impacts, but it is important to
note these do not fully determine damages - these will also depend on changes in demand and trade patterns
driven by socio-economic factors - but also complex responses to climate variability, pests and diseases, etc.
29 Multi-criteria analysis (MCA) is a structured approach used to determine overall preferences among alternative options,
where options accomplish several objectives.
AEA Technology Environment, August 2005
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Watkiss, Paul; Downing, Tom; Handley, Claire & Butterfield, Ruth. The Impacts and Costs of Climate Change, text, September 2005; Oxford, England. (digital.library.unt.edu/ark:/67531/metadc29337/m1/37/: accessed May 26, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; .