Climate cost modelling : analysis of damage and mitigation frameworks and guidance for political use

This report provides a comprehensive overview of climate cost modelling, from the perspective of damage costs and mitigation costs respectively. It also provides guidance for policymakers on which framework shall be used to derive climate costs for different policy objectives. For both frameworks, the study describes the landscape of available models and their methods. It analyses the role and impact of different influencing factors and separates them into categories, such as scenarios, normative choices or structural elements. The report identifies and discusses the main sources of uncertainties and the range of the literature’s values. It discusses limitations of interpreting model results — making assumptions and approaches of different climate models transparent. Finally, there is a practical guidance in four steps on the process to derive a climate cost ‘price tag’ targeted to a specific policy question. The internalisation of external costs calls for applying a damage costs framework, while identifying the necessary effort for complying with an agreed temperature limit requires mitigation costs, for example.