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Economic Aspects of Adaptation to Climate Change

Costs, Benefits and Policy Instruments

image of Economic Aspects of Adaptation to Climate Change

Climate change poses a serious challenge to social and economic development. This report provides a critical assessment of adaptation costs and benefits in key climate sensitive sectors, as well as at national and global levels. It also moves the discussion beyond cost estimation to the potential and limits of economic and policy instruments - including insurance and risk sharing, environmental markets and pricing, and public private partnerships - that can be used to motivate adaptation actions.

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Empirical Estimates of Adaptation Costs and Benefits: A Critical Assessment

Empirical estimates of costs and benefits can serve as a key criterion for making decisions on adaptation. They can also be useful for establishing “price tags” for overall adaptation needs that would then need to be met through international, domestic, and private funding sources. There is a relatively large amount of information on adaptation costs at the sectoral level, although it is unevenly distributed. Studies for coastal zones show that while significant investment will be needed for coastal protection, total costs of protection represent a relatively small percentage of national Gross Domestic Product (GDP). However, there are significant regional differences and the normalised protection costs might be significantly higher for certain regions. In the agricultural sector, a general finding from available studies is that relatively modest adaptation measures can significantly offset declines in projected yield as a result of climate change, although these benefits depend upon the crop, growing region, and level of climate change. For the other sectors there are only a few isolated estimates of adaptation costs and benefits. Aggregate, multi-sectoral studies on costs of adaptation are also becoming available at the global level and, in some cases, at the national level. While potentially relevant from a policy perspective, available global and national estimates of adaptation costs have significant limitations: scaling up to aggregate levels from a limited (and very local) evidence base; issues of both under counting as well as double-counting; and finally lack of clear articulation of the benefits of the adaptation measures that are costed.

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