Physico-economic evaluation of climate metrics: A conceptual framework

The design of multi-gas mitigation policies requires methods for comparing the climate impact of different forcing agents—so-called metrics. A multitude of climate metrics has been presented in the literature. Key characteristics of any metric are (a) its impact function, i.e. its functional relationship to physical climate parameters, and (b) the weighting of impacts over time. In view of these characteristics, we present a physico-economic framework which allows classifying climate metrics from the literature in a straight-forward manner. From the economics perspective, the Global Damage Potential can be considered as a first-best benchmark metric since it ensures that the trade-off between different forcing agents is efficient. The conceptual framework based on economic principles shows that virtually all climate metrics including Global Warming Potential and Global Cost Potential can be constructed as variants of the Global Damage Potential. The framework facilitates a structured discussion on climate metrics since it reveals normative assumptions and simplifications that are implicit to the choice of a climate metric. The evaluation of commonly used metric approaches in terms of uncertainties reveals that the choice of metric is largely characterized by trade-offs between different kinds of uncertainties: explicit ones which are directly linked to operational feasibility and implicit structural ones which reflect the degree of policy relevance. Based on our findings, we suggest as an alternative option for policy applications to base exchange rates between forcing agents on an explicit analysis of the value-based, scientific and scenario uncertainties in the context of a physico-economic metric, rather than eliminating the relevant uncertainties by the choice of a physical metric.