Economics of Adaptation to Climate Change

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 2º C above pre-industrial levels by 2050. A 2º 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 [1]—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 [2]—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 [3]report and seven country case study reports—covering Bangladesh [4], Bolivia [5], Ethiopia [6], Ghana [7], Mozambique [8], Samoa [9], and Vietnam [10]. 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.