The Impacts and Costs of Climate Change Page: 36
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The Impacts and Costs of Climate Change
Figure 9. The Modelled Profile of Economic Costs over Time (0% prtp)
2000 2020 2040 2060 2080 2100 2120 2140 2160 2180 2200 2220 2240 2260 2280
Source: FUND. Version 2.8. Pure rate of time preference. Time horizon 2300.
There is no equity adjustment, it is assumed that costs and benefits can be traded off, coverage of market and non-market
impacts is partial, and socially contingent effects and climate system major events are. They are presented only as an
illustration of the effects of discount rate.
Weighting of Effects (Distributional or Equity Weighting)
Many models show that at small to moderate climate change, poorer countries (Africa, India, and
Latin America) are net economic losers, whereas richer countries, especially mid- northern latitudes,
show smaller losses or may gain from moderate warming, at least in the short-term. The IPCC (in it's
summary for policy makers) recognises that 'the impacts of climate change will fall disproportionately
upon developing countries and the poor persons within all countries, and thereby exacerbate inequities
in health status and access to adequate food, clean water, and other resources.'
The disproportionate impacts of climate change on developing countries occurs because:
* These countries are exposed to significant climatic threats;
* Their economies rely more heavily on climate-sensitive activities;
* They are close to environmental tolerance limits; and they are poorly prepared to adapt to climate
In contrast, richer societies tend to be better able to adapt, their economies are less dependent on
climatic resources, and climatic hazards are less disruptive to economic growth. There are issues in
applying CBA for climate change, where impacts are spread across countries with very different
income levels. An aggregate estimate of the impacts of climate change inevitably implies combining
benefits and disbenefits across winners and losers.
There are different ways of aggregating economic effects in different countries or regions, and this
influences the global values. This has been a major source of contention in the climate change
valuation discussion. For example, studies which have adjusted willingness to pay (WTP) estimates
for income differentials across regions using local values have led to major debate43. As a result, there
has been a shift towards the aggregation of monetised impacts using so-called equity weights
(distributional weights). By using equity weighting, we are able to take into account how the costs
and benefits accrue to different groups in society. Generally policies that deliver greater net benefit to
individuals in lower income groups are rated more favourably than those that benefit higher. Equity
43 When aggregated, this implies lower monetary valuation for a life lost in Bangladesh for example, than in the for example
in Europe This approach has led to criticism in international policy discussions, and raises the issue of how to be consistent
in policy development between domestic and international expenditure.
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/m1/47/: accessed April 28, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; .