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FEATURE STORY

Economics of Adaptation to Climate Change

June 6, 2011

STORY HIGHLIGHTS
  • The study aims to develop a global estimate of adaptation costs for informing the international community’s efforts in the climate negotiations
  • The study finds that the cost between 2010 and 2050 of adapting to approximately 2oC warmer world by 2050 is in the range of $70 billion to $100 billion a year
  • In addition to the main report, seven country case studies were published

As developing countries weigh how best to revitalize their economies and craft a sustainable development path to boost living standards, they will have to factor in the reality that the global annual average temperature is expected to be 4ºC above pre-industrial levels by 2100. A 4ºC warmer world will experience more intense rainfall and more frequent and more intense droughts, floods, heat waves, and other extreme weather events. As a result, it will have dramatic implications for how countries manage their economies, care for their people and design their development paths. Countries will need to adopt measures to adapt to climate change. These measures offer a way to make the effects of climate change less disruptive and spare the poor and the vulnerable from shouldering an unduly high burden.

Against this backdrop, the global community adopted the Bali Action Plan at the 2007 United Nations Climate Change Conference. The plan calls for developed countries to allocate “adequate, predictable, and sustainable financial resources and new and additional resources, including official and concessional funding for developing country parties” to help them adapt to climate change. It also underscores that international cooperation is essential for building capacity to integrate adaptation measures into sectoral and national development plans.

How high will the price tag be? Studies to date have provided only a wide range of estimates, from $4 billion to $109 billion a year. That is why the Economics of Adaptation to Climate Change (EACC) study was initiated in early 2008 by the World Bank in partnership with the governments of Bangladesh, Plurinational State of Bolivia, Ethiopia, Ghana, Mozambique, Samoa, and Vietnam, and funded by the governments of The Netherlands, Switzerland, and The United Kingdom. Its objectives are twofold: to develop a global estimate of adaptation costs for informing the international community’s efforts in the climate negotiations, and to help decision-makers in developing countries assess the risks posed by climate change and design national strategies for adaptation.

To address these objectives, the study was conducted on two parallel tracks: (1) a global track—a top-down approach, in which national databases were used to generate aggregate estimates at a global scale, drawing on a wide variety of sector studies; and (2) a country level track—a bottom-up approach, in which sub-national data were aggregated to generate estimates at economywide, sectoral, and local levels. This Synthesis Report integrates and summarizes the key findings of a global study report and seven country case study reports—covering BangladeshBoliviaEthiopiaGhanaMozambiqueSamoa, and Vietnam. By providing information on lessons learned and insights gained on adaptation to climate change from global, country, and sector-level analyses, the hope is to help policymakers worldwide prioritize actions, along with developing a robust, integrated approach for greater resilience to climate risks. The Report begins with the concepts and methodology used for analyses in both the global and the country case studies, including a discussion of study limitations. This is followed by a synthesis of key results from the global and country tracks and a conclusion with lessons learned.

Global Cost Estimates

The objectives of the report are to develop an estimate of adaptation costs for developing countries and to help decisionmakers in developing countries understand and assess the risks posed by climate change and design better strategies to adapt to climate change.

This initial study report, which focuses on the first objective, finds that the cost between 2010 and 2050 of adapting to an  pproximately 2oC warmer world by 2050 is in the range of $70 billion to $100 billion a year. This range is of the same order of magnitude as the foreign aid that developed countries now give developing countries each year, but it is still a very low percentage of the wealth of countries as measured by their GDP.

Social Dimensions of Adaptation

The social component of the study aims to highlight how vulnerability to climate change is socially differentiated, what elements are needed to strengthen the adaptive capacity of poor people and regions, and how governments can support adaptation that addresses the needs of the poorest and most vulnerable, while maximizing co-benefits with development goals. In addition, the study draws attention to ‘soft’ or institutional and policy measures in adaptation, which are well placed to complement ‘hard’ infrastructure investments. The social component complements the global and sector-specific analyses of the EACC study by bringing the voices of the poor and vulnerable to the analysis to help ensure that climate-resilient adaptation investments best respond to their needs.

To achieve these objectives, this study employed a combination of innovative analytical methods including participatory scenario analysis to reveal local stakeholders’ assessments of robust adaptation pathways in the context of uncertainty. By bringing together local knowledge with expert information, the social component generated new evidence on how vulnerability is socially differentiated; identified the risks and benefits of adaptation options for a range of actors in an integrated and cross-sectoral manner; and highlighted the importance of social accountability and good governance for achieving pro-poor, climate resilient development. The study extends the use of participatory scenario analysis to include a focus on local development planning in national contexts, while the fieldwork results present how current coping strategies and policy emphases may guide development of future adaptation measures.

This body of research aims to inform our diagnosis of climate change; our understanding of vulnerability; the political economy of climate policy and action; the composition of local and national actors and coalitions; and the design, monitoring and review of process and policy instruments. In doing so, it is hoped that results may be used to inform the setting of targets and thresholds and the identification of benchmarks for success in adaptation planning. In particular, this report aims to demonstrate that integrating a social perspective into national efforts to design adaptation strategies will contribute to developing climate action that targets poor and disadvantaged groups at national and sub-national levels.