The Economic Implications of Climate Adaptation Strategies

Abstract

Climate change adaptation is all about making adjustments in order to cope with, or avoid, the negative impacts of climate change. It is possible to act ex post – after climate impacts have been revealed – or ex ante. One way, or the other adjustments that are, or would be, triggered by the presence of climate change impacts, represent the net benefits of planned adaptation. In this perspective, the assessment of the economic impacts of climate change is a fundamental step in the pursuit of efficient adaptation policies. Adaptation options with potential net benefits – in the absence of climate change – can be considered as no regret measures. The possibly negative effects due to climate change can also be compensated by broader economic policies (Goria & Gambarelli, 1970). Importantly, the degree of co-benefits from adaptation can be quantified only if impacts, and related adjustment costs, are assessed.An improved understanding of the interactions between impacts and adaptation costs highlights the mutual dependence between the assessment of climate impacts and related adjustments. While the former represents a necessary step towards the implementation of efficient adaptation policies, the latter implies a better handling of the former. Several assessment methodologies are available, which differ with respect to objectives, resolution, time horizon, and, not of minor importance, to the level of knowledge about physical impacts. A literature line discusses how the biophysical impacts of climate change can be translated into economic terms by means of cost benefit analyses. Such analyses mainly focus on market impacts amenable to economic valuation. More recent studies also address non market goods, generally adopting a multidisciplinary approach. Regardless of the different methodological choices, estimations of the economic impacts of climate change come out on several key sectors: agriculture, transport, insurance, water resources, health tourism, ecosystems, and energy supply (Dellarole, 2016). Some studies indicate nonlinear effects which could exhibit long term timing lags. Market impacts can also trigger side effects which are economically relevant, but are generally neglected in the sectoral assessments.

Keywords- climate adaptation, economic implications, impact assessment, co-benefits, adjustment costs, cost-benefit analysis, sectoral impacts, sustainable policies.