Abstract
Many critics of economic analysis of climate change impacts and response options claim that information is needed on ecosystem characteristics as well as on economic values to fully inform decisions about how climate change affects human well-being. Information on the irreversibility of impacts also is important, critics argue, because it relates to how society evaluates implications for intergenerational equity. In addition, because climate change is subject to a large degree of Knightian uncertainty, it is useful to understand both the information available for assessing climate change risks, and how individuals themselves perceive and evaluate risks. The paper discusses rationales for using these types of information as important complements to benefit-cost analysis for evaluating climate change risks and responses. Ideally such information could be available in a “dashboard” for decision makers assessing social and economic impacts, although limits on currently available information are a significant barrier to using that approach.
Acknowledgments
Views expressed in the paper are the author’s alone and should not be attributed to the World Bank or its member countries. The author acknowledges with gratitude comments from Fran Sussman, Ed Barbier, an anonymous referee, and other authors in the issue, as well as editorial assistance from Elaine Wylie.
References
Anthoff, D., Tol, R. S. J., & Yohe, G. W. (2009). Risk aversion, time preference, and the social cost of carbon. Environmental Research Letters, 4(2), 024002. doi:10.1088/1748-9326/4/2/024002.10.1088/1748-9326/4/2/024002Search in Google Scholar
Batie, S. S. (2008). Wicked problems and applied economics. American Journal of Agricultural Economics, 90(5), 1176–1191.10.1111/j.1467-8276.2008.01202.xSearch in Google Scholar
Bellamy, R., Chilvers, J., Vaughan, N. E., & Lenton, T. M. (2013). “Opening up” geoengineering appraisal: Multi-Criteria Mapping of options for tackling climate change. Global Environmental Change, 23(5), 926–937. doi:10.1016/j.gloenvcha.2013.07.011.10.1016/j.gloenvcha.2013.07.011Search in Google Scholar
Berger, A., Brown, C., Kousky, C., & Zeckhauser, R. (2011). The challenge of degraded environments: How common biases impair effective policy. Risk Analysis, 31(9), 1423–1433. doi:10.1111/j.1539-6924.2010.01477.x.10.1111/j.1539-6924.2010.01477.xSearch in Google Scholar
Bishop, R. C. (1978). Endangered species and uncertainty: The economics of a safe minimum standard. American Journal of Agricultural Economics, 60(1), 10. doi:10.2307/1240156.10.2307/1240156Search in Google Scholar
Böhringer, C., & Jochem, P. E. P. (2007). Measuring the immeasurable: A survey of sustainability indices. Ecological Economics, 63(1), 1–8. doi:10.1016/j.ecolecon.2007.03.008.10.1016/j.ecolecon.2007.03.008Search in Google Scholar
Ciriacy-Wantrup, S. V. (1952). Resources conservation: Economics and policies. Berkeley: University of California Press.10.1525/9780520349209Search in Google Scholar
Ekins, P., Simon, S., Deutsch, L., Folke, C., & De Groot, R. (2003). A framework for the practical application of the concepts of critical natural capital and strong sustainability. Ecological Economics, 44(2–3), 165–185.10.1016/S0921-8009(02)00272-0Search in Google Scholar
Fankhauser, S., Tol, R. S. J., & Pearce, D. W. (1997). The aggregation of climate change damages: A welfare theoretic approach. Environmental and Resource Economics, 10(3), 249–266. doi:10.1023/A:1026420425961.10.1023/A:1026420425961Search in Google Scholar
Fankhauser, S., Tol, R. S. J., & Pearce, D. W. (1998). Extensions and alternatives to climate change impact valuation: On the critique of IPCC Working Group III’s impact estimates. Environment and Development Economics, 3(01), 59–81. doi:10.1017/S1355770X98000047.10.1017/S1355770X98000047Search in Google Scholar
Faucheux, S., & Froger, G. (1995). Decision-making under environmental uncertainty. Ecological Economics, 15(1), 29–42. doi:10.1016/0921-8009(95)00018-5.10.1016/0921-8009(95)00018-5Search in Google Scholar
Gerst, M. D., Howarth, R. B., & Borsuk, M. E. (2010). Accounting for the risk of extreme outcomes in an integrated assessment of climate change. Energy Policy, 38(8), 4540–4548. doi:10.1016/j.enpol.2010.04.008.10.1016/j.enpol.2010.04.008Search in Google Scholar
Gowdy, J. (2004). The revolution in welfare economics and its implications for environmental valuation and policy. Land Economics, 80(2), 239–257.10.2307/3654741Search in Google Scholar
Gowdy, J., & Manner, M. (2010). The evolution of social and moral behavior: Evolutionary insights for public policy. Ecological Economics, 69(4), 753–761. doi:10.1016/j.ecolecon.2008.04.021.10.1016/j.ecolecon.2008.04.021Search in Google Scholar
Gsottbauer, E., & Bergh, J. C. J. M. van den. (2011). Environmental policy theory given bounded rationality and other-regarding preferences. Environmental and Resource Economics, 49(2), 263–304. doi:10.1007/s10640-010-9433-y.10.1007/s10640-010-9433-ySearch in Google Scholar
Hammitt, J. K. (2013). Positive versus normative justifications for benefit-cost analysis: Implications for interpretation and policy. Review of Environmental Economics and Policy, 7(2), 199–218. doi:10.1093/reep/ret009.10.1093/reep/ret009Search in Google Scholar
Hanley, N., & Barbier E. B. (2009). Pricing Nature: Cost-Benefit Analysis and Environmental Policy. Cheltenham, UK: Edward Elgar.Search in Google Scholar
Howarth, R. B. (1997). Sustainability as opportunity. Land Economics, 73(4), 569. doi:10.2307/3147246.10.2307/3147246Search in Google Scholar
Howarth, R. B. (2007). Towards an operational sustainability criterion. Ecological Economics, 63(4), 656–663. doi:10.1016/j.ecolecon.2007.02.009.10.1016/j.ecolecon.2007.02.009Search in Google Scholar
Howarth, R. B., & Wilson, M. A. (2006). A theoretical approach to deliberative valuation: Aggregation by mutual consent. Land Economics, 82(1), 1–16.10.3368/le.82.1.1Search in Google Scholar
IPCC. (2007). Climate change 2007: Synthesis report. Contribution of Working Groups I, II and III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change (p. 104). Geneva, CH: IPCC.Search in Google Scholar
IPCC. (2014). Summary for policymakers, in Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral Aspects. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. Cambridge, UK and New York: Cambridge University Press: 1–32.Search in Google Scholar
Knight, F. H. (1921). Risk, uncertainty, and profit. Library of Economics and Liberty. Retrieved from http://www.econlib.org/library/Knight/knRUP.html.Search in Google Scholar
Kopits, E., Marten, A. L., & Wolverton, A. (2013). Moving forward with incorporating “catastrophic” climate change into policy analysis (Working Paper #2013-01). Washington, DC:.” National Center for Environment Economics. Retrieved from http://yosemite.epa.gov/ee/epa/eed.nsf/WPNumber/2013-01?OpenDocument.Search in Google Scholar
Kousky, C., Rostapshova, O., Toman, M., & Zeckhauser, R. (2009). Responding to threats of climate change mega-catastrophes. Washington, DC: The World Bank. Retrieved from http://elibrary.worldbank.org/doi/book/10.1596/1813-9450-5127.10.1596/1813-9450-5127Search in Google Scholar
Kunreuther, H., Heal, G., Allen, M., Edenhofer, O., Field, C. B., & Yohe, G. (2013). Risk management and climate change. Nature Climate Change, 3(5), 447–450. doi:10.1038/nclimate1740.10.1038/nclimate1740Search in Google Scholar
Lempert, R. J., Groves, D. G., Popper, S. W., & Bankes, S. C. (2006). A general, analytic method for generating robust strategies and narrative scenarios. Management Science, 52(4), 514–528. doi:10.1287/mnsc.1050.0472.10.1287/mnsc.1050.0472Search in Google Scholar
Lenton, T. M. (2011). Early warning of climate tipping points. Nature Climate Change, 1(4), 201–209. doi:10.1038/nclimate1143.10.1038/nclimate1143Search in Google Scholar
Lenton, T. M., & Ciscar, J.-C. (2013). Integrating tipping points into climate impact assessments. Climatic Change, 117(3), 585–597. doi:10.1007/s10584-012-0572-8.10.1007/s10584-012-0572-8Search in Google Scholar
Leopold, A. (1949). A Sand County almanac, and sketches here and there. Oxford, UK: Oxford University Press.Search in Google Scholar
Masood, E. (1995). Developing countries dispute use of figures on climate change impacts. Nature, 376(6539), 374.10.1038/376374b0Search in Google Scholar
Nelson, J. A. (2013). Ethics and the economist: What climate change demands of us. Ecological Economics, 85, 145–154.10.1016/j.ecolecon.2011.07.029Search in Google Scholar
Neumann, J. E, & Strzepek, K. (2014). State of the literature on the economic impacts of climate change in the United States. Journal of Benefit-Cost Analysis,5(3), 411–443.10.1515/jbca-2014-9003Search in Google Scholar
Norton, B. G. (2005). Sustainability: A philosophy of adaptive ecosystem management. Chicago, IL: University Of Chicago Press.10.7208/chicago/9780226595221.001.0001Search in Google Scholar
Norton, B. G., & Noonan, D. S. (2007). Ecology and valuation: Big changes needed. Ecological Economics, 63, 664–675.10.1016/j.ecolecon.2007.02.013Search in Google Scholar
Norton, B. G., & Toman, M. A. (1997). Sustainability: ecological and economic perspectives. Land Economics, 73(4), 553. doi:10.2307/3147245.10.2307/3147245Search in Google Scholar
Pearce, D. W., Cline, W. R., Achanta, A. N., Fankhauser, S., Pachauri, R. K., Tol, R. S. J., & Vellinga, P. (1996). The social costs of climate change: Greenhouse damage and the benefits of control. In J. P. Bruce, H. Lee & E. F. Haites (Eds.), Climate Change 1995: Economic and Social Dimensions of Climate Change. Contribution of Working Group III to the Second Assessment Report of the Intergovernmental Panel on Climate Change. Cambridge, UK: Cambridge University Press.Search in Google Scholar
Pindyck, R. S. (2013). The climate policy dilemma. Review of Environmental Economics and Policy, 7(2), 219–237. doi:10.1093/reep/ret007.10.1093/reep/ret007Search in Google Scholar
Ravallion, M. (2010). Mashup indices of development. Washington, DC: The World Bank. Retrieved from http://elibrary.worldbank.org/doi/book/10.1596/1813-9450-5432.10.1596/1813-9450-5432Search in Google Scholar
Sagoff, M. (2004). Price, principle, and the environment. Cambridge, UK; New York, NY: Cambridge University Press.10.1017/CBO9780511617416Search in Google Scholar
Scheffer, M., Carpenter, S. R., Lenton, T. M., Bascompte, J., Brock, W., Dakos, V., & Vandermeer, J. (2012). Anticipating critical transitions. Science, 338(6105), 344–348. doi:10.1126/science.1225244.10.1126/science.1225244Search in Google Scholar
Spash, C. L. (2008). Deliberative monetary valuation and the evidence for a new value theory. Land Economics, 84(3), 469–488. doi:10.3368/le.84.3.469.10.3368/le.84.3.469Search in Google Scholar
Summers, L., & Zeckhauser, R. (2008). Policymaking for posterity. Springer Science and Business Media, 37, 115–140.10.3386/w14359Search in Google Scholar
Sussman, F., Weaver, C., & Grambsch, (2014). Challenges in applying the paradigm of welfare economics to climate change. Journal of Benefit-Cost Analysis,5(3), 347–376.10.1515/jbca-2014-9001Search in Google Scholar
Toman, M. A. (1994). Economics and “sustainability”: Balancing trade-offs and imperatives. Land Economics, 70(4), 399–413.10.2307/3146637Search in Google Scholar
Toman, M. A. (1999). Sustainable decision making: The state of the art. In M. O’Connor & C. Spash (Eds.), In Valuation and the Environment: Principles and Practices. Cheltenham, UK: Edward Elgar Publishing, Ltd.Search in Google Scholar
U.S. EPA. (2014). Guidelines for preparing economic analyses. U.S. Environmental Protection Agency. Retrieved from http://yosemite.epa.gov/ee/epa/eerm.nsf/vwAN/EE-0568-50.pdf/$file/EE-0568-50.pdf.Search in Google Scholar
U.S. Office of Management and Budget (OMB). (2003). Circular A-4. Washington, DC: OMB. Retrieved from http://www.whitehouse.gov/omb/circulars_a004_a-4.Search in Google Scholar
Van der Ploeg, F., & de Zeeuw, A. (2014). Climate tipping and economic growth: Precautionary saving and the social cost of carbon. Presented at the Fifth World Congress of Environmental and Resource Economists, Istanbul: Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.Search in Google Scholar
Weyant, J. (2014). Integrated assessment of climate change: state of the literature. Journal of Benefit-Cost Analysis,5(3), 377–409.10.1515/jbca-2014-9002Search in Google Scholar
Woodward, R. T., & Bishop, R. C. (1997). How to decide when experts disagree: Uncertainty-based choice rules in environmental policy. Land Economics, 73(4), 492–507.10.2307/3147241Search in Google Scholar
Yohe, G. (2009). Toward an integrated framework derived from a risk-management approach to climate change. Climatic Change, (95), 325–339.10.1007/s10584-009-9614-2Search in Google Scholar
Zeckhauser, R. J., & Sunstein, C. R. (2009). Overreaction to fearsome risks (Discussion Paper 2009-02). Cambridge, MA: Harvard Environmental Economics Program.Search in Google Scholar
©2014 by De Gruyter
Articles in the same Issue
- Frontmatter
- Introduction to a special issue entitled Perspectives on Implementing Benefit-Cost Analysis in Climate Assessment
- Challenges in applying the paradigm of welfare economics to climate change
- Integrated assessment of climate change: state of the literature
- State of the literature on the economic impacts of climate change in the United States
- Improving the practice of economic analysis of climate change adaptation
- The need for multiple types of information to inform climate change assessment
- Embedding (some) benefit-cost concepts into decision support processes with deep uncertainty
Articles in the same Issue
- Frontmatter
- Introduction to a special issue entitled Perspectives on Implementing Benefit-Cost Analysis in Climate Assessment
- Challenges in applying the paradigm of welfare economics to climate change
- Integrated assessment of climate change: state of the literature
- State of the literature on the economic impacts of climate change in the United States
- Improving the practice of economic analysis of climate change adaptation
- The need for multiple types of information to inform climate change assessment
- Embedding (some) benefit-cost concepts into decision support processes with deep uncertainty