The social costs of climate change: The IPCC second assessment report and beyond

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Climate change is expected to have far-reaching impacts. Earlier studies have estimated an aggregated monetised damage equivalent to 1.5 to 2.0% of World GDP (for 2×CO2). According to these estimates, the OECD would face losses equivalent to 1.0 to 1.5% of GDP, and developing countries 2.0 to 9.0%. While these figures are preliminary and highly uncertain, recent findings have not, as yet, changed the general picture. As is shown in this paper, estimates that are fully corrected for differences in purchasing power parity do not significantly differ from the initial figures. Newer studies increasingly emphasise adaptation, variability, extreme events, other (non-climate change) stress factors, and the need for integrated assessment of damages. Incorporating these factors has lead to increased differences in estimated impacts between different regions and sectors. Estimates of market impacts in developed countries tended to fall, while non-market impacts have become more important. Marginal damages are more interesting from a policy point of view. Earlier estimates range from about $5 to $125 per tonne of carbon, with most estimates at the lower end of this range. These figures are based on power functions in the level of climate change. The rate of change may be equally important, as are the speed of adaptation, restoration and value adjustment. Furthermore, future vulnerability to climate change will differ from current vulnerability: market impacts could fall (relatively) with economic growth while non-market impacts may rise.

Samuel Fankhauser is with the Program for Measuring Incremental Costs for the Environment (PRINCE), Global Environment Facility Secretariat, 1818 H Street NW, Washington DC 20433 USA. The views expressed in the paper are his own and not necessarily those of the Global Environment Facility or its associated agencies. Richard S. J. Tol is with the Institute for Environmental Studies, Vrije Universiteit, De Boelelaan 1115, 1081 HV Amsterdam, The Netherlands.