Benefit-cost analyses seek to translate climate change impacts, including lost or gained ecosystem services, into a monetary metric so that they can be compared to estimates of the costs and benefits associated with policies to limit the magnitude or adapt to the impacts of climate change. Alternatively, cost-effectiveness analysis is often used when the costs and benefits of action differ greatly in character, or when the benefits are subject to greater uncertainty or controversy. Cost-effectiveness analysis allows analytically based comparisons of decisions without requiring that all impacts—in this case, damages from climate change and costs of emissions reduction— be reduced to a single metric. Both approaches can be powerful tools for informing decisions, but disagreements about (1) how to value ecosystem services or other resources for which market prices do not exist; (2) how to handle low-probability-high-consequence events, discount rates, and risk aversion; (3) prospects for technological innovation; and (4) how to incorporate distributional and intergenerational equity concerns lead to wide ranges in estimates of the social value of climate actions.
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