Working Paper

The Economics of Climate Change


Global climate change poses a threat to the well-being of humans and other living things through impacts on ecosystem functioning, biodiversity, capital productivity, and human health. Climate change economics attends to this issue by offering theoretical insights and empirical findings relevant to the design of policies to reduce, avoid, or adapt to climate change. This economic analysis has yielded new estimates of mitigation benefits, improved understanding of costs in the presence of various market distortions or imperfections, better tools for making policy choices under uncertainty, and alternate mechanisms for allowing flexibility in policy responses. These contributions have influenced the formulation and implementation of a range of climate change policies at the domestic and international levels.