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Compendium on methods and tools to evaluate impacts of, and vulnerability and adaptation to, climate change


Cost-benefit Analysis
Description This approach uses a conceptual framework for analyzing an adaptation measure by identifying, quantifying, and monetizing the costs and benefits associated with the measure. Spreadsheet software is often used to facilitate analysis; however, the specific approaches used are highly dependent on the measure under consideration. This tool can be used to determine whether the benefits of the adaptation measure outweigh the costs, whether net benefits are maximized, and how the measure compares to other options.
Appropriate Use A benefit-cost analysis is useful when the adaptation being considered is likely to involve significant expenditures of capital and labor. Benefit-cost analyses of adaptation responses often involve a high degree of uncertainty when quantifying nonmarket goods and services as well as when anticipating the direction and magnitude of climate change.
Scope All locations; all sectors; national or site-specific.
Key Output A monetary comparison of the costs and benefits of a proposed adaptation measure.
Key Input Quantitative values for all significant costs and benefits associated with the proposed response.
Ease of Use A major undertaking, involving extensive research and economic analysis.
Training Required Knowledge in economics as well as training in estimating the monetary values of costs and benefits. Knowledge of physical sciences related to benefits.
Training Available Contact Stratus Consulting for more information.
Computer Requirements Lotus 1-2-3 or Microsoft Office Excel spreadsheet software helpful.
Documentation The World Bank. Environmental Assessment Sourcebook:
Vol. 1. Policies, Procedures, and Cross-Sectoral Issues. Published October 1996 by World Bank ISBN: 0-8213-1843-8 SKU: 11843
Vol. 2. Sectoral Guidelines. Published September 1995 by World Bank ISBN: 0-8213-1844-6 SKU: 11844
Vol. 3. Guidelines for Environmental Assessment of Energy and Industry Projects. Published December 1994 by World Bank ISBN: 0-8213-1845-4 SKU: 11845
Available at http://publications.worldbank.org/ecommerce/catalog/product-detail?product_id=194213&
Applications Used to evaluate sea level rise adaptation options in Maine, USA.
Contacts for Framework, Documentation, Technical Assistance Bob Raucher

Stratus Consulting, P.O. Box 4059, Boulder, CO 80306 USA; Tel: +1.303.381.8000; Fax: +1.303.381.8200; e-mail: braucher@stratusconsulting.com; website: http://www.stratusconsulting.com/.
Cost Price of Vol. 1: $ 22.00. Price of Vol. 2: $ 30.00. Price of Vol. 3: $ 22.00. Analysis entails a high cost in terms of time for an economic analyst. Method can be modified if financial constraints prohibit a full-scale analysis.
References Smith, J.B., S.E. Ragland, R.S. Raucher, and I. Burton. 1997. Assessing Adaptation to Climate Change: Benefit-Cost Analysis. Report to the Global Environment Facility, prepared by Hagler Bailly Services, Inc., Boulder, CO, USA.

Tol, R.J.S. 2000. Equitable Cost-Benefit Analysis of Climate Change. In Efficiency and Equity of Climate Change Policy, Carlo Carraro (ed.). Dordrecht, The Netherlands: Kluwer Academic Publishers. 368pp.