Shaping climate resilient development: Economics of climate Adaptation

Abstract

Climate adaptation is an urgent priority for the custodians of national and local economies, such as finance ministers and mayors - as well as to leaders in the private sector. Adaptation measures are available to make societies, communities and companies more resilient to the impacts of climate change. But decision makers need the facts to identify the most cost-effective investments, they need to know the potential climate-related damages over the coming decades, to identify measures to mitigate these risks - and to figure whether the benefits will outweigh the costs. The Economics of Climate Adaptation (ECA) methodology provides decision makers with a fact base to answer these questions in a systematic way. It enables them to understand and quantify the impact of climate change and to identify actions to minimize that impact at the lowest cost. It therefore allows decision makers to integrate adaptation with economic development and sustainable growth (Adger et al, Nat Clim Change 3(2):112-117, 2013). Case studies in more than 20 different regions around the globe, ranging from Maharashtra in India to the US Gulf coast, showed that a significant portion of expected damage from climate change can be averted using cost-effective adaptation measures - a strong case for preventive action. Since many mountain regions are especially sensitive to natural hazards yet in many instances lack precise and long historic records of pertinent data, the ECA methodology provides a tool to overcome quite some of these limitations by making extensive use of probabilistic risk assessment. Beyond cost-effective protection, risk transfer is a powerful tool to manage low frequency/high severity impacts; it can protect assets and livelihoods from catastrophic events. Risk transfer puts a price tag on risk and thereby incentivizes investments in prevention measures - thus helps twofold to strengthen climate resilience.