Evaluating the Economics of Climate Change: An In-Depth Review of Cost-Benefit Analysis Approaches

Abstract

As climate change intensifies, understanding the economic implications of mitigation and adaptation strategies becomes critical. This review explores the economic dimension of climate action through cost-benefit analysis (CBA), focusing on how investments in climate resilience can yield economic and social benefits. By evaluating the costs of climate policies against their potential to reduce environmental damages, enhance health, and support sustainable development, CBA provides a framework for making informed, economically sound decisions. This review synthesizes recent findings across sectors including energy, agriculture, and infrastructure revealing that while upfront costs of adaptation and mitigation may be high, the long-term economic gains often outweigh these investments. For instance, studies indicate that every dollar invested in climate resilience can yield returns of two to four times in avoided damage and recovery costs. Additionally, CBA underscores the importance of timing, showing that early investment in green infrastructure and carbon reduction strategies prevents higher costs associated with delayed action. The review concludes that cost-benefit analysis is a valuable tool, enabling policymakers and stakeholders to prioritize climate investments that optimize both economic returns and environmental protection. This approach not only ensures that resources are directed toward the most effective solutions but also highlights the economic rationale for proactive climate action, promoting a balanced pathway toward a sustainable and resilient future.

Keywords: cost-benefit analysis, climate resilience, economic returns, mitigation strategies, sustainable development