How are the benefits of reducing greenhouse gas emissions valued?
For impacts on commodities that are marketed goods, actual decisions by consumers are observed in real markets; for example, how in the past firms and consumers have reacted to higher prices of fossil fuels and raw materials. This method is reliable and unbiased, but has narrow applicability – in particular it is not useful for ecological impacts as these are non market impacts. For impacts on non-marketed goods, direct observation is not possible. Thus subjective methods are used which have wide applicability but lower reliability.
For impacts on commodities that are marketed goods, actual decisions by consumers are observed in real markets; for example, how in the past firms and consumers have reacted to higher prices of fossil fuels and raw materials. This method is reliable and unbiased, but has narrow applicability – in particular it is not useful for ecological impacts as these are non market impacts.
