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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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