Issues in Climate Change Damage Assessment

[ Home ] [ Up ]

Because of the nature of cost-benefit analysis, it is important that these benefits (or avoided damages) be expressed in monetary terms to the greatest extent possible.  While changes in the demand or supply for particular goods or services may be easily quantified in monetary terms, many of the damages of climate changes such as health impacts, biodiversity loss, and decreases in human amenity are not sold within the market and are not as easily quantified. 

As a result, economists have developed alternative methods by which to place values on such impacts.  One method that is frequently used in climate change is the contingent valuation method.  Through this method, a surveyor asks individuals about their willingness-to-pay for some policy initiative.  They are quite useful in determining the values of decreases in human amenity, ecosystem loss, species loss, and the value of human life{1}.  While some people may find the valuation of human life appalling, many economists try to include such values in their damage estimates to be comprehensive in their approach.   

Certainly valuation methods for estimating nonmarket impacts differ from those of market impacts; however, it is crucial to measure both types of impacts in order to produce a comprehensive assessment of the impacts of climate change.