Figure 2.1

Marginal Avoided Damage Costs (MAD) and Marginal Abatement Costs (MAC)

An important practical handicap in performing cost-benefit analyses for mitigating damages due to climate change is the likelihood that both the cost and benefit curves may exhibit great uncertainty. Despite the greater uncertainty implied by this figure's shaded area for climate damages than for mitigation costs, consideration of all the factors not included in most conventional mitigation cost estimates (see accompanying text) could well make mitigation cost uncertainties far wider than conventional thinking presupposes.

Source: Munasinghe, M., P. Meier, M. Hoel, S. W. Hong and A. Aaheim, 1996. "Applicability of Techniques of Cost Benefit Analysis to Climate Change," IPCC, 1996c, Social and Economic Dimensions, chapter 5, Cambridge Univ. Press, UK.

Also reproduced in C. J. Jepma and M. Munasinghe, 1997. Climate Change Policy, Cambridge Univ. Press, Cambridge, UK, chapter 3.

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