Economics of climate adaptation

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The discipline of economics occupies an awkward relationship in the face of climate change challenges. While climate change, and the costs associated with adapting to climate change, are increasingly recognised as issues of economic significance, most economic analysis struggles to deal with subjective nature of climate change risks or the inherent uncertainty around climate change impacts and their consequences. For some people economics is part of the problem, and the less economic analysis is brought to bear on the search for solutions the better.

At its core, however, economics is a social science that speaks to how people (and countries) take decisions to satisfy multiple needs and wants in the face of resource constraints and environmental uncertainty. Seen through this lens, the economics of climate change adaptation has a crucial role to play in marshaling finite resources to the most effective adaptation options and in comparing the impact of different adaptation measures so as to enable iterative improvements. Getting this right represents a work-in-progress and as the entries under this theme illustrate there is standard template for applying the discipline of economics to climate change adaptation decisions. An authentic application of economics to climate change adaptation will contain not only insights for the adaptation community but will also present important conceptual challenges to economists.

What seems clear, however, is that economic analyses remains an important means of presenting the case for adaptation and capturing political attention.

The studies and reports captured under this theme collate the efforts of a wide range of different agencies, countries and institutions to highlight the economic implications of climate change adaptation and the economic consequences of ignoring these implications.

As part of the contribution to regional- and national-scale economic impacts assessments, there are increasing studies that assess the economics of climate adaptation using multiple lines of evidence and different aggregation levels to address uncertainty and build a comprehensive evidence-base for policy makers. Model-derived aggregations are cross-referenced with national and sectoral economics studies, and case studies of local experiences. 

Examples

UNEP (AdaptCost study) and the governments of Kenya, Rwanda, Burundi, and Tanzania (DFID funded studies) with:

1) Assessments of climate change impacts and their economic costs – across priority sectors;

2) Analyses of the costs and benefits of adapting to these effects over different timescales;

3) Assessments of the potential for mitigation and low carbon growth opportunities; and

4) Domestic, regional and international policy recommendations on mitigation and adaptation.

The 3-year EC ClimateCost project, which seeks to assess the full costs of climate change (i.e. costs of inaction, mitigation and adaptation) looking at Europe in a global context also explores the socially contingent effects of climate change using climate change impacts and conflict information at a global scale.

Further resources

As the Stern Review (2007) points out, there is now clear scientific evidence that emissions from economic activity are causing changes to the Earth´s climate. A sound understanding of the economics of climate change is needed in order to underpin an effective global response to this challenge. Yet the development of this understanding has exposed highly variable economic analyses and conceptual faultlines in the discipline of economics itself.

Whilst economics has strong disciplinary antecedents in understanding risk and the consequences of different resource allocations, it has yet to find a standardised approach to assessing climate change risk, to dealing with the long-term and difficult-to-predict consequences of climate change or in advising as to how best to use scarce fiscal and human resources in adapting to climate change.

The collection of submissions under this theme represent the ongoing effort to find a meaningful application of economics to climate change adaptation. Whilst they represent a wide range of theoretical and analytical approaches, they concur in a number of insights:

  • Climate change has economic consequences.
  • Whilst climate change adaptation can be costly, it is often less expensive than not adapting.
  • Not all adaptation options are equally expensive or equally effective and economics can be useful in identifying locally appropriate and cost-effective adaptation options.
  • Representing climate change as an economic threat is not only appropriate but can also capture the attention of important public, business and political stakeholders.

Related resources

Related projects

AdaptCost: Analysis of the Economic Costs of Climate Change Adaptation in Africa

The economics of climate change in East Africa:

  • The economic impacts of climate change in Burundi
  • The economic impacts of climate change in Rwanda
  • The economic impacts of climate change in Kenya
  • The economic impacts of climate change in Tanzania 

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