Economic Analysis of Climate Change

The role of economic analysis in addressing climate change impacts and policies is to calculate the magnitude and distribution of damage caused by climate change, inform mitigation and adaptation policies, and assess trade-offs between climate change impacts, adaptation, and mitigation through cost-benefit analysis.

Integrated assessment models (IAMs) are used to produce cost-benefit analyses of climate change by incorporating aspects of the natural, social, and economic sciences to estimate the total economic impacts from climate change.

Monetary measures of non-market impacts, such as impacts on human health and ecosystems, are more difficult to calculate in economic analysis of climate change because they are not directly linked to market transactions and GDP.

The economic analysis of climate change is challenging due to its long-term nature, substantial distributional issues within and across countries, and uncertainty about the physical damages of climate changes, human responses, and future socioeconomic development.

Economic assessments of climate change impacts are well-suited to market impacts, which are linked to market transactions and directly affect GDP. However, non-market impacts, such as impacts on human health and ecosystems, are more difficult to measure in monetary terms.

Global warming and its effects on Earth's climate system.

Humans burning fossil fuels.

Fossil fuel use, deforestation, and some agricultural and industrial practices.

Expanding deserts, more common heat waves and wildfires, melting permafrost and glacial retreat, intense storms, droughts, and other weather extremes, and rapid environmental change forcing many species to relocate or become extinct.

Ocean heating, ocean acidification, and sea level rise.