Valuing Climate Change Mitigation

Valuing Climate Change Mitigation

Applying Stated Preferences in the Presence of Uncertainty

Sonia Akter and Jeff Bennett

Valuing Climate Change Mitigation discusses the role of uncertainty in valuing the benefits of climate change mitigation policies using contingent valuation and choice experiment techniques. It treats climate change using three dimensions of uncertainty: scenario, policy and preference. Conceptual frameworks are advanced to account simultaneously for these various dimensions of uncertainty. The authors then explore the impact of introducing these uncertainties into benefit estimates for the Australian Carbon Pollution Reduction Scheme.

Chapter 3: Uncertainty and Stated Preference Techniques in Practice

Sonia Akter and Jeff Bennett

Subjects: economics and finance, environmental economics, valuation, environment, climate change, environmental economics, valuation


3.1 INTRODUCTION The previous chapters described the background to this book and outlined the concepts relevant to its objectives. This chapter presents a review of the SP literature. The next section summarizes the SP studies that have valued climate change mitigation. Section 3.3 discusses the SP studies that are not about climate change mitigation but have accounted for environmental risk and uncertainty in the valuation exercise. A summary of the SP literature relating to the current progress in accounting for preference uncertainty is presented in Section 3.4; Section 3.5 concludes. 3.2 CLIMATE CHANGE IN THE SP LITERATURE A number of CV studies have addressed the issue of welfare gain from various climate change policy interventions (e.g. Berk and Fovell, 1999; Berrens et al., 2004; Cameron, 2005a; Viscusi and Zeckhauser, 2006; Lee and Cameron, 2008). Berk and Fovell’s (1999) study is one of the first CV studies attempting to estimate the welfare gain associated with climate change mitigation. In a public survey of Los Angeles area residents, they presented respondents with eight different climate change scenarios (four summers and four winters). The summer scenarios included combinations of a possible increase (decrease) in summer mean daily maximum temperature and a change in the likelihood of hot (cold) spells. The winter scenarios presented combinations of temperature (higher/lower) and precipitation (wetter/drier) changes. Respondents were asked for their WTP to prevent that climate scenario from materializing. The findings suggested that respondents’ WTP was influenced primarily by increases in temperature during the summer scenarios and decreases...

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