Valuing Nonmarket Impacts of Climate Change: From Reduced Form to Welfare

Nonmarket damages are largely missing from aggregate climate impacts, although reduced-form research is beginning to quantify these effects. We propose a general, theoretically consistent method for calculating welfare changes for nonmarket climate damages. This approach has minimal data requirements and provides a bridge between standard valuation techniques and reduced-form climate impact research. We elucidate the theoretical properties of our welfare measure, showing that it tends to produce exact or conservative estimates of surplus changes. We illustrate our approach by estimating impacts of climate change on outdoor recreation using nationally representative time- use survey data, which reveals substantial net welfare gains by the end of the century.