the economics of climate change adaptation undp accra 2012 robert mendelsohn yale university

The Economics of Climate Change Adaptation

UNDP Accra 2012

Robert Mendelsohn

Yale University

Policy Questions

• What is adaptation?

• What adaptations are efficient?

• When should they occur?

• Where should they be done?

What is adaptation?

• Change in behavior in response to climate change.

• Examples: avoid running in hot afternoon, change to heat-loving crops, adjust water management, control disease causing pests

Objective of Adaptation

• Maximize net benefits (benefits minus costs) given that local climate has changed– Equate marginal benefit to marginal cost

• Depends on local conditions– Local climate– Local market– Other local factors

Where Should Adaptation be Done?

• Everywhere, but priority to places where climate change is having largest impact -Low latitudes could bear 70% of damages of climate change because already hot

• Not necessarily places with largest climate change (north pole)

What sectors are at risk?

• Market: agriculture by far the largest, energy, water, coastal, and forestry

• Nonmarket: ecosystem change (species loss, shifting systems), disease, heat stress, cold stress, recreation

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Can detailed impacts be predicted?

• Most analyses of climate impacts reveal hill-shaped relationship with temperature

• Benefits to farms in cool locations

• Damages to farms in warm locations

• Impacts vary a great deal across the landscape

Marginal impacts of Temperature and Precipitation

Timing

• Timing of many adaptation actions• Done too soon, raises cost and can be

ineffective (new crop before warm enough will not grow well)

• Done too late, damages can be large (as if there is no adaptation)

• Because adaptation actions must wait for climate to change, the bulk of adaptation actions need to be done in the second half of this century

Autonomous Adaptation

• Autonomous– Private benefit for actor– Self interest to perform– Will be done without help– Most often done after climate changes

• Examples:– Shifting from crops to animals– Switching crop and animal species– Changing timber species

Public Adaptations

• Benefit many (jointly consumed)

• Require coordination (government)

• Examples– Conservation – Water planning– Flood control– Storm warning – Technical change

What should governments do?

• Help create setting to encourage markets and private ownership of private resources– Encourage long term use rights – Enforce private property rights

• Manage public adaptations (conservation, public resources, externalities)

• Address fairness issues

Common Property

• Requires collective action to protect• Individual users will not adapt• Overharvest common forests or fisheries,

overgraze grasslands, overutilize water resources

• Climate change will make these current problems worse by making these resources more scarce

• Need to encourage long term use rights

Nonmarket Adaptations

• Public health responses to potential illnesses and heat stress

• Retreat options for marshes and mangroves against sea level rise

• Flexible and dynamic conservation management for species migration to new habitat

Externalities

• Secondary ozone pollution formation will require tighter regulations on emissions

• Flooding will require land use regulations and flood control

Severe Weather Events

• Can adapt now to hurricanes, droughts, floods because current problem

• Severe events likely to cause more damage in the future as economy grows

• Greenhouse gases may make events more intense of frequent

Can poor adapt?

• Poor can do autonomous adaptation

• Household farms may adapt better than commercial farms because less specialized

• May help poor adapt for equity reasons: they are low income and unlikely to have contributed much to emissions

Additionality

• Unfair to expect climate change funds to pay for development

• Yet focus on additionality will hamper efforts to proceed-too difficult to parse out what is adaptation versus development

• Recommend new focus on integration between climate adaptation and development

Policy Suggestions

• Do not confuse adaptation and mitigation

• Providing assistance for mitigation does not help a poor country cope with climate change

What adaptation can be done now?

• Focus on funding public adaptation where needed and when it is needed

• Do planning and research to get ready• Encourage institutional changes: improve public

management and markets for natural resources (land, water, fisheries)

• Help developing countries grow and become less dependent on climate sensitive economic sectors- namely agriculture