Economic analysis of climate change is about using economic tools and models to calculate the magnitude and distribution of damages caused by climate change. It can also give guidance for the best policies for mitigation and adaptation to climate change from an economic perspective. There are many economic models and frameworks. For example, in a cost–benefit analysis, the trade offs between climate change impacts, adaptation, and mitigation are made explicit. For this kind of analysis, integrated assessment models (IAMs) are useful. Those models link main features of society and economy with the biosphere and atmosphere into one modelling framework.[1] The total economic impacts from climate change are difficult to estimate. In general, they increase the more the global surface temperature increases (see climate change scenarios).[2] Economic analysis also looks at the economics of climate change mitigation.
Most types of climate change effects are associated with an economic cost.[3]: 936–941 Many of the effects have impacts that are linked to market transactions and therefore are directly affect GDP. However, there are also non-market impacts which are harder to translate into economic costs. These include the impacts of climate change on human health, biomes and ecosystem services. Economic analysis of climate change is challenging as climate change is a long-term problem. Furthermore, there is still a lot of uncertainty about the exact impacts of climate change and the associated damages to be expected. Future policy responses and socioeconomic development are also uncertain.
Mitigation costs will vary according to how and when emissions are cut. Early, well-planned action will minimize the costs.[4] Globally, the benefits of keeping warming under 2 °C exceed the costs.[5] Cost estimates for mitigation for specific regions depend on the quantity of emissions allowed for that region in future, as well as the timing of interventions.[6]: 90 Economists estimate the cost of climate change mitigation at between 1% and 2% of GDP.[7]
^IPCC (2014). "Summary for Policymakers" (PDF). IPCC AR5 WG2 A 2014. p. 12. Archived (PDF) from the original on 19 December 2019. Retrieved 15 February 2020.
^Cite error: The named reference smith was invoked but never defined (see the help page).
^Stern, N. (2006). Stern Review on the Economics of Climate Change: Part III: The Economics of Stabilisation. HM Treasury, London: http://hm-treasury.gov.uk/sternreview_index.htm
^Sampedro, Jon; Smith, Steven J.; Arto, Iñaki; González-Eguino, Mikel; Markandya, Anil; Mulvaney, Kathleen M.; Pizarro-Irizar, Cristina; Van Dingenen, Rita (2020). "Health co-benefits and mitigation costs as per the Paris Agreement under different technological pathways for energy supply". Environment International. 136: 105513. Bibcode:2020EnInt.13605513S. doi:10.1016/j.envint.2020.105513. hdl:10810/44202. PMID 32006762. S2CID 211004787.
^IPCC, 2007: Technical Summary - Climate Change 2007: Mitigation. Contribution of Working Group III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change Archived 2009-12-11 at the Wayback Machine [B. Metz, O.R. Davidson, P.R. Bosch, R. Dave, L.A. Meyer (eds)], Cambridge University Press, Cambridge, United Kingdom and New York, NY, United States., XXX pp.
^"Can cost benefit analysis grasp the climate change nettle? And can we..." Oxford Martin School. Retrieved 11 November 2019.
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