Analyses of the Effects of Global Change on - US Climate Change ...

<strong>Analyses</strong> <strong>of</strong> <strong>the</strong> <strong>Effects</strong> <strong>of</strong> <strong>Global</strong> <strong>Change</strong> on Human Health and Welfare and Human Systems
welfare (Boyd and Banzhaf, 2006). 17 While
<strong>the</strong>re are several well-done valuation analyses
for non-market effects <strong>of</strong> climate change (as
described later in this chapter), it is fair to
characterize this literature as opportunistic in
its focus; where data and methods exist, <strong>the</strong>re
are high quality studies, but <strong>the</strong> overall coverage
<strong>of</strong> non-market effects remains inadequate.
4.3.2 Impacts Assessment and
Monetary Valuation
The process <strong>of</strong> estimating <strong>the</strong> welfare effects <strong>of</strong>
climate change involves four steps: (1) estimate
climate changes; (2) estimate physical effects
<strong>of</strong> climate change, (3) estimate <strong>the</strong> impacts on
human and natural systems that are amenable
to valuation and (4) value or monetize effects.
The first step requires estimating <strong>the</strong> change
in relevant measures <strong>of</strong> climate, including
temperature, precipitation, sea level rise, and
<strong>the</strong> frequency and severity <strong>of</strong> extreme events.
The second step involves estimating <strong>the</strong> physical
effects <strong>of</strong> those changes in climate. Such effects
might include changes in ecosystem structure
and function, human exposures to heat stress,
changes in <strong>the</strong> geographic range <strong>of</strong> disease
vectors, or flooding <strong>of</strong> coastal areas. In <strong>the</strong> third
step, <strong>the</strong> physical effects <strong>of</strong> climate change are
translated into measures that economists can
value, for example <strong>the</strong> number and location <strong>of</strong>
properties that are vulnerable to floods, or <strong>the</strong>
number <strong>of</strong> individuals exposed to and sensitive
to heat stress. Many analyses that reach this
step in <strong>the</strong> process, but not all, also proceed
on to <strong>the</strong> fourth step, valuing <strong>the</strong> changes in
dollar terms.
The simplest approach to valuation would be to
apply a unit valuation approach. For example,
<strong>the</strong> cost <strong>of</strong> treating a nonfatal case <strong>of</strong> heat stress
or malaria attributable to climate change is a
first approximation <strong>of</strong> <strong>the</strong> value <strong>of</strong> avoiding
that case altoge<strong>the</strong>r. In many contexts, however,
unit values can misrepresent <strong>the</strong> true marginal
economic impact <strong>of</strong> <strong>the</strong>se changes. For example,
if climate change reduces <strong>the</strong> length <strong>of</strong> <strong>the</strong> ski
season, individuals could engage in ano<strong>the</strong>r
17 Some political economists also emphasize <strong>the</strong> role <strong>of</strong>
explicit recognition <strong>of</strong> non-market environmental values
as an important step in improving <strong>the</strong> well-being
<strong>of</strong> poor populations (Boyce and Shelley, 2003).
recreational activity, such as golf. Whe<strong>the</strong>r
<strong>the</strong>y might prefer skiing to golf at that time
and location is something economists might
try to measure.
This step-by-step linear approach to effects
estimation is sometimes called <strong>the</strong> “damage
function” approach. A damage function
approach might imply that we look at effects
<strong>of</strong> climate on human health as separate and
independent from effects on ecology and
recreation, an assumption that ignores <strong>the</strong>
complex economic interrelationships among
goods and services and individual decisions
regarding <strong>the</strong>se. Recent research suggests that
<strong>the</strong> damage function approach, under some
conditions, may be both overly simplistic
(Freeman, 2003) and sometimes subject to
serious errors (Strzepek and Smith, 1995;
Strezpek et al., 1999).
Economists have a number <strong>of</strong> techniques
available for moving from quantified effects
to dollar values. In some cases, <strong>the</strong> values
estimated in one situation—e.g., one ecosystem
or species—can be transferred and used to
value ano<strong>the</strong>r. For example, value or benefits
transfer is commonly used by federal agencies
such as <strong>the</strong> U.S. EPA and U.S. Forest Service to
value recreation when <strong>the</strong>re is insufficient time
or budget to conduct original valuation studies
(Rosenberger and Loomis, 2003). Techniques
commonly used by economists to value nonmarket
goods and services include:
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