Nonmarket Valuation and the Estimation of Damages from Global Warming

This paper is concerned with nonmarket valuation in the context of global warming. First, concerning the impact of global warming: what are the prospects for the inclusion of nonmarket values in estimates of the damages of warming? The second question relates to the role of the Principles and Guidelines as the supporting document for water resource projects. Are tools for nonmarket valuation, as found in the Principles and Guidelines satisfactory for water resource project evaluation with a changing climate? The potential effects of climate change are so numerous and subtle that it would be prohibitively costly to measure them all. Thus a comprehensive program for including nonmarket damages as part of the costs of global warming seems ill-advised. Where specific concerns arise, researchers may learn from small scale studies. Many of the damages of global warming are diminished by the ability of humans to adapt at small costs, especially the nonuse component of nonmarket values. When the question concerns minor water resource projects, the gains from including extra effects induced by global warming seem to be small compared with the costs. The Principles and Guidelines does not reflect current practices in benefit estimation. However, it is not clear that this is a serious problem, because most practitioners continue to revise their understanding of valuation methods. If the Principles and Guidelines were to be revised, it would make sense to provide more current guidelines for all of the behavioral models and contingent valuation. Revisions of the Principles and Guidelines should not do anything special for anthropocentrically induced climate change.