Problems With Estimating the Economic Impacts of Averting Climate Change: A Look at Water Resources
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Averting climate change may have substantial water-resource-related benefits to agricultural, industrial, recreational, and residential household users. Economic benefits are usually estimated assuming that individuals face no uncertainty in decision making, but the benefits from averting climate change will accrue primarily to individuals in the future. Predicting future benefits is usually done using ex ante economic methods, and propogating uncertainty or specifiying the appropriate distributions in estimating the magnitude of the benefits is a problem. After describing the key issues relating climate change and water resources, the paper explains why economic theory fails to demonstrate which method appears more reasonable than the other. Alternatively, we might attempt to estimate the benefits from averting climate change using a benefits analysis of similar events that have already occurred. Many suggestions for conducting a benefits transfer, including one in the area of water-based recreation, are offered as ways to glean something about possible water-resource-related benefits from averting climate change.
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