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Compendium on methods and tools to evaluate impacts of, and vulnerability and adaptation to, climate
change
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Cost-Effectiveness
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Description
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Cost-effectiveness analysis takes a predetermined objective and seeks ways to accomplish it as
inexpensively as possible. Unlike cost-benefit analysis, the level of the benefit is treated as an
external given, and the objective of the analysis is to minimize the costs associated with the
achievement of this specified objective.
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Appropriate Use
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Cost-effectiveness on the adaptation side might be used when, under different climate change
scenarios, a required minimum level of a public good or service (e.g., flood protection) is specified
and the option to deliver this good at the lowest cost is sought. Also particularly applicable to
those cases where the analyst may be unwilling or unable to monetize the most important policy
impact. Cost-effectiveness is generally more applicable for individual project decisions that are
applying decision rules or procedures which have already been determined in policy, strategic, or
program decisions.
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Scope
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All regions. Can be difficult to apply to those sectors where the market does not apply a
satisfactory measure of value for costs.
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Key Output
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Ranking of alternatives relative according to cost-effectiveness.
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Key Input
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Cost data for a specified level of policy outcome.
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Ease of Use
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Can be a significant undertaking. Valuing nonmarket goods can require knowledge of specialized
techniques.
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Training Required
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Knowledge of economics as well as training in estimating the monetary values of costs, especially
nonmarket values.
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Training Available
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Contact Stratus Consulting for more information see contacts information.
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Computer Requirements
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Computer access
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Documentation
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Boardman, A.E., D.H. Greenberg, A.R. Vining and D.L. Weimer. 1996. Cost-Benefit Analysis: Concepts
and Practice. Prentice Hall, Upper Saddle River, NJ, USA.
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Applications
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Analysis of pathways to stabilization. See also UKCIP and APF frameworks in Chapter 2.
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Contacts for Framework, Documentation, Technical Assistance
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Bob Raucher
Stratus Consulting, P.O. Box 4059, Boulder CO 80306; Tel: +1.303.381.8000; e-mail: braucher@stratusconsulting.com; website: http://www.stratusconsulting.com/.
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Cost
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Method can entail a high cost in terms of time for an economic analyst.
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References
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Goulder, L.H. and S.H. Schneider. 1999. Induced technological change and the attractiveness of CO2
emissions abatement policies. Resource and Energy Economics 21:211-253.
Ha-Duong, M., M. Grubb, and J.C. Hourcade. 1997. Influence of socioeconomic inertia and uncertainty
on optimal CO2 emission abatement. Nature 390:270-273.
Wigley, T.M.L., J. Edmonds, and R. Richels. 1996. Economic and environmental choices in the
stabilization of atmospheric CO2 concentrations. Nature 379(6582):240-243.
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