Economic and social analysis of climate change is vital in order to examine the causes, their effects, and to design an efficient strategy allowing for the transition to sustainable development. Quantification of the impacts is surrounded by great uncertainty given the long-term time frame involved, along with the diverse methodologies, depending on the availability of local, national and regional information.

Economic and social analysis of climate change is a complex task involving a wide range of techniques and focuses, including quantitative predictive models, empirical studies, expert judgements and experimentation. Each of these focuses has its advantages and disadvantages, and a combination of approaches may thus prove an effective strategy. Meanwhile, given the heterogeneity of the sectors involved, the methodology must be adapted or modified in each case.

The methodology for studying climate change is based on the definition of a trend or baseline trajectory in economic activities, without including the impacts of climate change (business as usual), projecting trajectories of sectoral and overall economic growth, along with other key factors such as population, land-use change and consumption of water and energy. Definition of the baseline is fundamental, as it allows for comparisons of the different scenarios considered.

The impacts are, in general, calculated by means of quantitative models which compare the variables of interest reflecting the impacts of climate change against the corresponding baselines. The choice of method and the suppositions behind construction of the baseline are thus essential in order to estimate the costs of climate change.

Given that the impacts of climate change may be positive or negative, depending on the geographical region and economic sectors, the aggregation of the impacts of climate change must be subject to a Cost-Benefit Analysis (CBA) in order to devise an optimal economic strategy. This method comprises (i) identifying and quantifying the costs and benefits of the public policy measure under consideration, (ii) performing a monetary evaluation of the costs and benefits, which means predicting future flows, (iii) applying a discount rate to transfer the costs and benefits over time and so obtain the net present value, and (iv), using a decisionmaking rule to apply or exclude the selected public policy.

In the study undertaken by ECLAC, methodologies and tools for the calculation of the potential impacts of climate change on the main sectors of the economy are proposed. This selection is the result of the various analyses and studies performed.

For further information, please contact:
This email address is being protected from spambots. You need JavaScript enabled to view it.