Keywords: cost-benefit analysis, development economics, valuation
Impacts of climate change in monetary terms? Issues for developing countries
This paper raises some issues that may explain why developing countries are more reluctant than developed countries to let monetary estimates of the impacts of climate change determine climate policy. Many limitations of cost-benefit analysis become even stronger when applied to economies with distorted markets and limited abilities to adapt to new economic conditions. The implicit influence of distribution on monetary values also means that estimates of cost and benefits are less applicable for policy making in developing countries. However, some of the scepticism seems to arise from too high expectations of what cost-benefit analysis can provide. Its main advantage is probably that it is one out of a few tools for decision-making that allows data for the impacts of climate change to be systematised, evaluated and aggregated onto a common measure in accordance with well-defined principles.