7.1.2 Summary of the Second Assessment Report on Cost Issues
IPCCs SAR published a separate volume on the economic and social dimensions
of climate change (IPCC, 1996a). This report considered all aspects of climate
change, including impacts, adaptation, and mitigation of climate change. The
volume on economic and social dimensions was supplemented by a report from another
working group of the IPCC that dealt with scientific and technical analyses
of the impacts, adaptation, and mitigation of climate change (IPCC, 1996b).
The Third Assessment Report (TAR) is structured in a different way. Impacts
and adaptation are addressed together by one working group (WGII), and mitigation
by another group (WGIII). All the technical areas, including scientific, engineering,
economic, and social aspects of climate change impacts, adaptation, and mitigation,
however, are integrated in the working groups.
The WGII SAR (IPCC, 1996b) reported a number of cost estimates for individual
climate change mitigation technologies, but did not include specific subsections
or extensive discussions on the cost assessment framework or methodological
issues related to valuation issues. This section therefore only provides a short
summary of the coverage of costing methodologies in the report of the social
and economic dimensions by WGIII (IPCC, 1996a).
Costing methodologies were addressed as part of several chapters in the WGIII
SAR (IPCC, 1996a). These included chapters on the decision-making framework,
equity and social considerations, and intergenerational equity: discounting
and economic efficiency. Furthermore, the report included two conceptual chapters
on cost and methodologies, namely Chapter 5 (Applicability of Techniques of
CostBenefit Analysis to Climate Change) and Chapter 8 (Estimating the
Costs of Mitigating Greenhouse Gases). The first of these chapters included
a general outline of analytical approaches applied to climate change cost assessment,
with emphasis on costbenefit analysis and further development of this
framework to facilitate multi-attribute analysis. The analytical approaches
presented were discussed in relation to different decision frameworks and valuation
Chapter 8 of the WGIII SAR (IPCC, 1996b) was a methodological introduction
to a subsequent chapter on comparative assessments of the modelling results
for mitigation costs. A taxonomy of the mitigation cost components applied in
the models was presented, including the direct engineering and financial costs
of specific technical measures, economic costs for a given sector, macroeconomic
costs, and welfare costs. The importance of different assumptions, such as development
patterns, technological change, and policy instruments, were then assessed in
relation to cost concepts and modelling approaches. Some of the focal areas
considered were top-down versus bottom-up models, double
dividend issues and no regret options, long-term projections, and special issues
related to mitigation-cost analysis for developing countries.
The WGIII SAR (IPCC, 1996a) also included an extensive review of the mitigation
costs for different parts of the world based on top-down and bottom-up methodologies.
The review, which was based on an assessment of several hundred studies, raised
a number of important costing issues that are critical to the further development
of cost concepts and models. These issues include, inter alia, model
structure, assumptions on demographic and economic growth, availability and
costs of technical options, timing of abatement policies, discount rate, and
the effect of research and development (R&D).