How much will it cost to help developing countries adapt to climate change? How can country development plans incorporate adaptation measures? This study estimates the cost between 2010 and 2050 of adapting to a two-degree temperature increase by 2050 as between $70-$100 billion a year. This is more than 80 per cent of the development assistance given in 2008, but is approximately 0.17 per cent of developing countries’ GDP. Key lessons are to build flexibility into both policies and hardware and to ensure that outside assistance for institutional reform builds on internally-driven changes.
Studies on the costs of adaptation offer a wide range of estimates, from $4-$109 billion a year. A recent critique suggests that these may be substantial underestimates. Similarly, National Adaptation Programmes of Action identify and cost only urgent and immediate adaptation measures. They do not incorporate the measures into long-term development plans. This Economics of Adaptation to Climate Change (EACC) study is intended to fill this knowledge gap. It uses national databases to generate aggregate estimates and a series of country level studies disaggregating national data to local and sectoral levels. Adaptation costs are defined as additional to the costs of development that would have been undertaken even in the absence of climate change.
Calculating the global cost of adaptation remains a complex problem, requiring projections of economic growth, structural change, climate change, human behaviour, and government investments 40 years in the future. The EACC study tried to establish a new benchmark for research of this nature, adopting a consistent approach across countries and sectors and over time. But in the process, it had to make important assumptions and simplifications, to some degree biasing the estimates. Breaking down its findings reveals that:
- Infrastructure, coastal zones, water supply and flood protection account for the bulk of the estimated costs.
- The East Asia and Pacific Region bears the highest adaptation cost, and the Middle East and North Africa the lowest.
- The highest costs for East Asia and the Pacific are in infrastructure and coastal zones; for Sub-Saharan Africa, water supply and flood protection and agriculture; for Latin America and the Caribbean, water supply and flood protection and coastal zones; and for South Asia, infrastructure and agriculture.
- Scenarios show adaptation costs increasing over time, although falling as a percentage of GDP. This suggests that countries become less vulnerable to climate change as their economies grow.
- Adaptation costs as a percentage of GDP are considerably higher in Sub-Saharan Africa than in any other region, largely because of the lower GDPs but also the higher costs of adaptation for water resources (driven by changes in rainfall).
Economic development is a central element of adaptation to climate change, but it should not be business as usual. It is important to invest in human capital, develop competent and flexible institutions, focus on weather resilience and adaptive capacity, and tackle the root causes of poverty. Eliminating poverty is central to both development and adaptation, since poverty exacerbates vulnerability to climate change impacts and weather variability. Policymakers need to:
- Avoid rushing into long-term adaptation investments unless these apply to a wide range of climate outcomes or until the range of uncertainty about future weather variability and climate has narrowed
- Start with measures that tackle the weather risks that countries already face
- Avoid creating incentives that encourage development in locations exposed to severe weather risks.
