Climate change costs money. But how do we calculate these costs – both now and in the future? INFRAS was commissioned by the German Environmental Agency (UBA) to produce a comprehensive overview of climate cost modelling. The report also provides guidelines for policy makers on how to put a price tag on climate change.
People want to know how much it cost to tackle the climate problem. But they also want to know the price of not doing anything. However, answering both questions is a complicated process based on modelling. INFRAS’s report offers an overview of these models, their assumptions and their limitations.
Inaction is expensive – but action is not free either
Climate costs can be split into damage costs and mitigation costs: damage costs cover the damage resulting from greenhouse gas emissions – all over the world and into the distant future. Mitigation costs, on the other hand, are the cost of a specific set of climate policy measures along a mitigation pathway. There are various ways of calculating both types.
Widely varying estimates
As there is ongoing scientific discussion of the different influencing factors, estimates of climate costs vary widely. INFRAS project manager Quirin Oberpriller has the following to say about climate cost modelling: «There are many different, contentious assumptions. In order to set a cost rate, it is thus essential for the government to provide normative guidance.»
Politics: deriving a price tag in four steps
The final part of the INFRAS study for the German Environmental Agency focuses on politics. It provides policy makers with a practical, four-step guide on how to put a price tag on climate costs. This is important because, despite of the uncertainties climate costs entail, an officially approved price tag will help legitimate many climate policies.