Policy responses for adaptation

Part V of the Review analyses adaptation as a response to climate change.

Climate is a pervasive factor in social and economic development – one so universally present and so deeply ingrained that it is barely noticed until things go wrong. People are adapted to the distinct climate of the place where they live. This is most obvious in productive sectors such as agriculture, where the choice of crops and the mode of cultivation have been finely tailored over decades, even centuries, to the prevailing climate. But the same is true for other economic sectors that are obviously weather-dependent, such as forestry, water resources, and recreation. It is also evident in how people live their daily lives, for instance in working practices.

Adaptation will be crucial in reducing vulnerability to climate change and is the only way to cope with the impacts that are inevitable over the next few decades. In regions that may benefit from small amounts of warming, adaptation will help to reap the rewards. It provides an impetus to adjust economic activity in vulnerable sectors and to support sustainable development, especially in developing countries. But it is not an easy option, and it can only reduce, not remove, the impacts. There will be some residual cost – either the impacts themselves or the cost of adapting. Without early and strong mitigation, the costs of adaptation rise sharply.

Part V is structured as follows.

• Chapter 18 outlines key adaptation concepts and sets out an economic framework for adaptation.

• Chapter 19 examines the barriers and constraints to adaptation identified in this chapter. It sets out how governments in the developed world can promote adaptation by providing information and a policy framework for individuals to respond to market signals.

• Chapter 20 explores the particular issue of how developing countries can adapt to climate change. Developing countries lack the infrastructure, financial means, and access to public services that would otherwise help them adapt. The chapter shows the importance of support from the international community, and the need for investment in global public goods such as the development of resistant crops.

18 Understanding the Economics of Adaptation

Key Messages Adaptation is crucial to deal with the unavoidable impacts of climate change to which the world is already committed. It will be especially important in developing countries that will be hit hardest and soonest by climate change.

Adaptation can mute the impacts, but cannot by itself solve the problem of climate change. Adaptation will be important to limit the negative impacts of climate change. However, even with adaptation there will be residual costs. For example, if farmers switch to more climate resistant but lower yielding crops.

There are limits to what adaptation can achieve. As the magnitude and speed of unabated climate change increase, the relative effectiveness of adaptation will diminish. In natural systems, there are clear limits to the speed with which species and ecosystems can migrate or adjust. For human societies, there are also limits – for example, if sea level rise leaves some nation states uninhabitable.

Without strong and early mitigation, the physical limits to – and costs of – adaptation will grow rapidly. This will be especially so in developing countries, and underlines the need to press ahead with mitigation.

Adaptation will in most cases provide local benefits, realised without long lag times, in contrast to mitigation. Therefore some adaptation will occur autonomously, as individuals respond to market or environmental changes. Much will take place at the local level. Autonomous adaptation may also prove very costly for the poorest in society.

But adaptation is complex and many constraints have to be overcome. Governments have a role to play in making adaptation happen, starting now, providing both policy guidelines and economic and institutional support to the private sector and civil society. Other aspects of adaptation, such as major infrastructure decisions, will require greater foresight and planning, while some, such as knowledge and technology, will be of global benefit.

Studies in climate-sensitive sectors point to many adaptation options that will provide benefits in excess of cost. But quantitative information on the costs and benefits of economy-wide adaptation is currently limited.

Adaptation will be a key response to reduce vulnerability to climate change. Part II highlighted the significant impacts of climate change around the world. The Earth has already warmed by 0.7°C since around 1900. Even if all emissions stopped tomorrow, the Earth will warm by a further 0.5 – 1°C over coming decades due to the considerable inertia in the climate system. On current trends, global temperatures could rise by 2 – 3°C within the next fifty years or so, with several degrees more warming by the end of the century if emissions continue to grow.

But adaptation is not an easy or cost-free option. This Chapter outlines key adaptation concepts and sets out an economic framework for adaptation. It highlights that adaptation is unlikely to reduce the net costs of climate change to zero – namely there will be limits. There will be often residual damages from climate change and adaptation itself will bring costs. The final part of the chapter outlines why policies may be required to overcome barriers and constraints to adaptation in anticipation of future impacts. These policy responses are outlined in more detail in Chapters 19 and 20 for developed and developing countries, respectively.