2.4.2.4 Issues related to the valuation of non-market aspects

A basic problem in climate change studies is that a number of social impacts are involved that go beyond the scope of what is reflected in current market prices. These include impacts on human health, nature conservation, biodiversity, natural and historical heritage, as well as potential abrupt changes to ecosystems. Furthermore, complicated valuation issues arise in relation to both market- and non-market areas, since climate change policies involve impacts over very long time horizons, where future generations are affected, as well as intra-generational issues, where relatively wealthy and relatively poor countries face different costs and benefits of climate change impacts, adaptation and mitigation policies. Valuation of climate change policy outcomes therefore also involves assigning values to the welfare of different generations and to individuals and societies living at very different welfare levels today.

The valuation of inter-generational climate change policy impacts involves issues related to comparing impacts occurring at different points in time as discussed in Section 2.4.2.1 on discount rates, as well as issues in relation to uncertainty about the preferences of future generations. Since these preferences are unknown today many studies assume, in a simplified way, that consumer preferences will stay unchanged over time. An overview of some of the literature on the preferences of future generations is given by Dasgupta et al., (1999).

Other limitations in the valuation of climate change policy impacts are related to specific practical and ethical aspects of valuing human lives and injuries. A number of techniques can be used to value impacts on human health – the costs of mortality, for example, can be measured in relation to the statistical values of life, the avoided costs of health care, or in relation to the value of human capital on the labour market. Applications of valuation techniques that involve estimating the statistical values of life will face difficulties in determining values that reflect people in a fair and meaningful way, even with very different income levels around the world. There are obviously a lot of ethical controversies involved in valuing human health impacts. In the Third Assessment Report the IPCC recognized these difficulties and recommended that studies that include monetary values of statistical values of life should use uniform average global per-capita income weights in order to treat all human beings as equal (IPCC, 2001, Chapter 7).