Economic analysis of climate change

Economic analysis of climate change applies economic theory and evidence to assess climate impacts, adaptation, emissions reduction, and policy choices.

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Integrated assessment model: A model linking human activity and economic systems with climate processes to assess climate pathways and policy. These models combine emissions, warming, damages, and mitigation costs in one framework.
Carbon tax: A charge on greenhouse-gas emissions, usually set per tonne of carbon dioxide equivalent. Economic analysis estimates tax levels that reflect climate damages or meet emissions goals.
Climate justice: An approach to climate change focused on fairness in responsibility, impacts, and responses. Its distributional concerns can challenge aggregate economic measures of net benefit.
Climate uncertainty: Uncertainty about future climate conditions, impacts, and the outcomes of climate responses. Uncertain damages and policy effects widen the range of plausible economic estimates.
Social cost of carbon: The estimated monetary damages caused by emitting one additional tonne of carbon dioxide. It translates marginal climate damages into a value used in policy appraisal.
Emissions trading: A policy system that limits emissions and allows regulated entities to trade emissions permits. It uses market prices to allocate emissions reductions across firms.
Economic inequality: The uneven distribution of income, wealth, or economic resources among people or groups. Unequal exposure and capacity to respond complicate economy-wide damage estimates.
Tipping point (climatology): A threshold beyond which a climate system component may shift into a substantially different state. Potential abrupt changes are difficult to represent in smooth damage functions.
Discount rate: A rate used to convert future costs and benefits into present values. It strongly affects how present policy costs compare with future climate damages.
Climate adaptation: Adjustments in human or natural systems that reduce harm from actual or expected climate effects. Economic appraisal compares adaptation costs with the losses those measures can avoid.