Hedonic Pricing of Climate Change Impacts to Households in Great Britain

This study investigates the amenity value of climate to British households. By using the hedonic price approach, the marginal willingness to pay for small changes in climate variables is derived. Various indices of temperature and precipitation are used including means, ranges, extremes and January and July averages. We specify one hedonic regression including information on house prices and wage data for 755 Posttowns and found the model containing January and July averages of temperature and precipitation most appropriate. The estimates suggest that British people would typically prefer higher temperatures in January. Increased precipitation in January is likely to reduce welfare. Changes in temperature and precipitation in July are not significant. Limited global warming, with a more pronounced effect of temperature increases compared to higher precipitation levels during winter months, might thus benefit British households.