Working Group II: Impacts, Adaptation and Vulnerability

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2.4. Costing and Valuation

Methods of economic costing and valuation rely on the notion of opportunity cost of resources used, degraded, or saved. Opportunity cost depends on whether the market is competitive or monopolistic and on whether any externalities are internalized. It also depends on the rate at which the future is discounted, which can vary across countries, over time, and over generations. The impact of uncertainty also can be valued if the probabilities of different possible outcomes are known. Public and nonmarket goods and services can be valued through willingness to pay for them or willingness to accept compensation for lack of them. Impacts on different groups, societies, nations, and species must be assessed. Comparison of alternative distributions of welfare across individuals and groups within a country can be justified if they are made according to internally consistent norms. Comparisons across nations with different societal, ethical, and governmental structures cannot yet be made meaningfully.

Since the SAR, no new fundamental developments in costing and valuation methodology have taken place. Many new applications of existing methods to a widening range of climate change issues have demonstrated, however, the strengths and limitations of some of these methods. Research efforts are required to strengthen methods for multi-objective assessments. Multi-objective assessments are increasingly preferred, but the means by which their underlying metrics might more accurately reflect diverse social, political, economic, and cultural contexts must be developed. In addition, methods for integrating across these multiple metrics are still missing from the methodological repertoire. [2.5]

2.5. Decision Analytic Frameworks

Policymakers who are responsible for devising and implementing adaptive policies should be able to rely on results from one or more of a diverse set of decision analytical frameworks. Commonly used methods include cost-benefit and cost-effectiveness analysis, various types of decision analysis (including multi-objective studies), and participatory techniques such as policy exercises.

Very few cases in which policymakers have used decision analytical frameworks in evaluating adaptation options have been reported. Among the large number of assessments of climate change impacts reviewed in the TAR, only a small fraction include comprehensive and quantitative estimates of adaptation options and their costs, benefits, and uncertainty characteristics. This information is necessary for meaningful applications of any decision analytical method to issues of adaptation. Greater use of such methods in support of adaptation decisions is needed to establish their efficacy and to identify directions for necessary research in the context of vulnerability and adaptation to climate change. [2.7]

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