The economics of climate change refers to the study of the costs and benefits of actions aimed at reducing greenhouse gas emissions and mitigating the impacts of global warming. This includes the cost of reducing emissions and the benefits of avoiding the damage that would result from rising temperatures. Some of the key considerations in the economics of climate change include the cost of transitioning to low-carbon energy sources, the impact of climate change on human health and well-being, and the cost of protecting coastal cities and infrastructure from rising sea levels.
Climate change economics is concerned with the economic aspects of climate change, which can inform policies that governments may consider in response. A number of factors contribute to the difficulty of this and the politics of climate change: it is a long-term, intergenerational problem; benefits and costs are distributed unequally both within and across countries; and the scientific consensus and public opinion on climate change must be considered. It refers to the study of the costs and benefits of reducing greenhouse gas emissions and the impact of climate change on economies. This includes the cost of mitigation (preventing emissions) and adaptation (responding to impacts) measures and the cost of inaction.
Climate change has significant economic implications such as increased frequency of natural disasters, changes in agriculture and food production, impacts on human health and labor productivity, and potential damages to infrastructure and property. The cost of inaction is likely to be higher than the cost of taking action. Mitigation measures include transitioning to clean energy, improving energy efficiency, and changing land use practices. Adaptation measures include investing in infrastructure to protect against sea level rise and improving water management.
Climate change effects may be long-lasting, such as sea-level rise, which will take thousands of years to reverse. Because of the long time scales and uncertainty surrounding global warming, analysts have created “scenarios” of future environmental, social, and economic changes. These scenarios can help governments understand the potential consequences of their decisions.
Climate change impacts include biodiversity loss, sea level rise, increased frequency and severity of some extreme weather events, and ocean acidification. Economists have attempted to quantify these effects in monetary terms, but their conclusions can be contentious. The two main policy responses to global warming are to reduce greenhouse gas (GHG) emissions (climate change mitigation) and to adapt to its effects (climate change adaptation) (e.g., by building levees in response to sea level rise).
One strategy for dealing with the uncertainties of global warming is to make sequential decisions. This strategy recognizes that decisions on global warming must be made with incomplete information and that decisions made in the short term may have long-term consequences. Risk management may be used by governments as part of their policy response to global warming. A risk-based approach, for example, can be applied to climate impacts that are difficult to quantify in economic terms, such as the effects of global warming on indigenous peoples.
