This study has estimated the CDD call option price change according to climate change and calculated the increase in hedging cost for the electricity sector in summer, which is part of the cost of climate change. A new temperature process was created by altering the mean temperature and standard deviation for the temperature process of Korea, which was estimated by applying a mean reversion model to Korea’s past temperature data. Monte Carlo simulations were applied to the process, and CDD index values were generated from them. The expected CDD call option prices were computed using a simple CDD call option pricing formula. We estimated the increase in hedging costs for temperature risk in summer by applying the rate of change of the CDD call option price to the potential CDD call option transaction value as of 2017, which was estimated separately with additional assumptions. In this paper, we construct twelve scenarios in which the average temperature rises by zero to 1.8 degrees and the standard deviation rises oneo two-fold. The CDD call option price is estimated to rise by 650o5,000%, contingent upon each scenario. In terms of monetary value, if Scenario II (in which the standard deviation is increased 1.5-fold without changing the average temperature) is applied, the damage amounts to 2,266.5 billion KRW as the CDD price increase rate would be 655%. In Scenario IV, in which the average temperature rises by 0.8 degrees without changing the standard
deviation, the increase rate is 1,510%, which is equivalent to 34.83 trillion KRW.

[Key Words] Cost of Climate Change, Wea