Our Common Future Under Climate Change

International Scientific Conference 7-10 JULY 2015 Paris, France

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Thursday 9 July - 17:30-19:00 UPMC Jussieu - Amphi 25

3309 - Costs and benefits of adaptation: Lessons from developed and developing countries

Parallel Session

Lead Convener(s): M. Mullan (OECD, Paris, France)

Convener(s): U. Lehr (Gesellschaft fuer Wirtschaftliche Strukturforschung, Institute for Economic Structures Research, Osnabrueck, Germany)

17:30

The Cost and Benefits of Adaptation in Developing Countries: Updated Review and Insights for Policy

P. Watkiss (Paul Watkiss Associates, Oxford, United Kingdom), A. Hunt, (University of Bath, Bath, United Kingdom), M. Lago, (Ecologic Institut , Berlin, Germany), J. Rouillard, (Ecologic Institute , Berlin, Germany), J. Troeltzsch, (Ecologic Institut , Berlin, Germany)

Abstract details
The Cost and Benefits of Adaptation in Developing Countries: Updated Review and Insights for Policy

P. Watkiss (1) ; A. Hunt, (2) ; M. Lago, (3) ; J. Rouillard, (4) ; J. Troeltzsch, (3)
(1) Paul Watkiss Associates, Oxford, United Kingdom; (2) University of Bath, Bath, United Kingdom; (3) Ecologic Institut , Berlin, Germany; (4) Ecologic Institute , Berlin, Germany

Abstract content

This paper presents the findings of a major review and synthesis on the costs and benefits of adaptation in developing countries, undertaken by the ECONADAPT project, funded by the European Union’s Seventh Framework Programme for research, technological development and demonstration under grant agreement no 603906*, and with co-funding from the UK Department for International Development and by the International Development Research Centre**.

While recent reviews (IPCC, 2014) have identified a low evidence base in this area, the last few years have seen a growing number of national initiatives and risk and sector specific studies.  Over 500 relevant studies have been identified, and a growing number of these are in developing countries. The paper presents a review of this evidence base, focusing on estimates and insights for least developed and middle income countries.  It starts with a mapping of studies, both geographically and by risk.  This shows the coverage of adaptation costs and benefits has increased when compared to previous reviews.  The geographical coverage now includes Africa, South and Central America and Asia, though there remain some important regional gaps. The coverage of risks has also increased: there is a very large literature on coastal zone adaptation, and increasing studies on water management, floods and agriculture.  Major gaps remain, however, for ecosystems and business/industry.

The paper then summarises a detailed review of this evidence base and draws some policy lessons , using examples. From a policy perspective, there are now three distinct set of studies, using different methods.  The first uses scenario-based impact assessment (I-A) and focuses on technical adaptation.  The second uses investment and financial flow analysis (IFF) and considers likely mark-ups for adaptation.  The final use the more recent focus on iterative risk management, low-regret options and decision making under uncertainty.  The outputs of these approaches are very different in terms of framing and importantly the types of adaptation options.  They also produce very different estimates of the costs (and benefits) of adaptation, which is of particular importance in relation to National Adaptation Plans and international climate finance.  A key finding is that IFF studies indicate higher costs in the short-term, due to the consideration of the existing adaptation deficit, while policy orientated studies indicate higher adaptation costs in the medium- to longer term, due to the consideration of multiple risks, uncertainty, existing policy objectives and standards, and additional opportunity, transaction and policy costs. 

The paper concludes with some key policy findings and future research needs.  The latter includes the need for more empirical evidence at multiple time and spatial scales, and economic analysis of adaptive capacity, non-technical measures, opportunity, transaction and policy costs, cross-sectoral/cross-cutting  effects and the limits of adaptation. Further work is also needed to understand transferability of existing estimates. A key priority is to further encourage the sharing of information and good practice.

 

Chambwera, M., G. Heal, et al (2014): Economics of adaptation. In: Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral Aspects. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental IPCC. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA, pp. 945-977.

*The views expressed in this paper are the sole responsibility of the authors and do not necessarily reflect the views of the European Commission. The European Community is not liable for any use made of this information.

**Co-funding was provided by: i) UK DFID, as part of the project ‘Early Value-for-Money Adaptation: Delivering VfM Adaptation using Iterative Frameworks and Low-Regret Options’ -  this project has been funded by UK aid from the UK government; however the views expressed do not necessarily reflect the UK government’s official policies: ii) IDRC as part of the project ‘The Economics of Adaptation and Climate-Resilient Development’ – however the views expressed are entirely those of the study team and do not necessarily reflect the views of IDRC. 

17:40

Climate change adaptation: linking policy and economics in OECD countries

M. Mullan (OECD, Paris, France), S. Buckle (OECD, Paris, France)

Abstract details
Climate change adaptation: linking policy and economics in OECD countries

M. Mullan (1) ; S. Buckle (1)
(1) OECD, Environment Directorate, Paris, France

Abstract content

This presentation will summarise the key findings of a forthcoming OECD publication on the Economics of Adaptation in OECD countries (released end May 2015), including a survey of these countries. By drawing upon policy-makers’ experiences to date, this presentation will examine how economic analysis has informed policy development to date, and priority areas for further data gathering and tool development.

OECD countries are increasingly taking action to prepare for the effects of climate change. As of 2014, more than three-quarters of them have published, or are currently developing, national strategies for climate change adaptation. In preparing for climate change, countries are faced with the challenge of responding to a broad range of uncertain risks. The common element of their response is the emphasis on mainstreaming adaptation into government policies, with a focus upon capacity building. Based on the analysis in this paper, the following priorities emerge for evidence development and improved tools for economic analysis:

  • Reducing barriers to usage: Increasingly sophisticated approaches have been developed to account for uncertainty about climate impacts, often in the context of large infrastructure investments. However, countries’ experiences show that mainstreaming requires integration with existing appraisal systems for decision-making, and “light touch” approaches that are proportionate to the scale of the decision at hand.
  • Achieving sufficient breadth of coverage: The evidence base on costs and benefits has significantly improved in recent years, as sectoral and national coverage has increased. However, major gaps remain in sectoral coverage. For example, impacts on businesses and ecosystems remain poorly understood. Modelling of macroeconomic interactions remains at an early stage. More evidence on these areas is needed to develop coherent responses to a changing climate
  • Accounting for the distributional and normative dimension of climate change: Economic analysis provides an important input into the decision-making process, but it is also necessary to account for people’s perceptions of the risks from climate change.  In part, this is because decisions on how to respond to the risks from climate change frequently involve trade-offs between different values. In addition, the impacts of climate change will be felt most severely by the poor and the marginalised. Few studies based on OECD countries have accounted for these impacts to date.
17:50

Global challenge and regional analysis – Germany's vulnerability and adaptation to climate change

U. Lehr (Gesellschaft fuer Wirtschaftliche Strukturforschung, Institute for Economic Structures Research, Osnabrueck, Germany), T. Drosdowski, (Gesellschaft fuer Wirtschaftliche Strukturforschung, Institute for Economic Structures Research, Osnabrueck, Germany), A. Nieters, (Gesellschaft fuer Wirtschaftliche Strukturforschung, Institute for Economic Structures Research, Osnabrueck, Germany)

Abstract details
Global challenge and regional analysis – Germany's vulnerability and adaptation to climate change

U. Lehr (1) ; T. Drosdowski, (1) ; A. Nieters, (1)
(1) Gesellschaft fuer Wirtschaftliche Strukturforschung, Institute for Economic Structures Research, Energy and Climate, Osnabrueck, Germany

Abstract content

Overview

Although climate change is a global challenge, the effects occur locally and differ by region. The large timespan and the globality of climate change often obscure rather than clarify the discussion. Germany is located in a moderate climate zone; nevertheless it is vulnerable to disruptions due to its economic dependence on high-tech production sites. The largest disturbances come from extreme weather events. Global warming not only changes the climate conditions, but its effects also challenge the way we are used to model economic development and economic growth. Dealing with this calls for climate change adaptation, and adaptation of our models to be able to simulate climate change effects as well. A feasible adaptation strategy will be developed by local decision makers, and thus needs to assess regional impacts of climate change and the socio-economic effects resulting from changing climate conditions. This contribution is based on findings from a study within the German Framework Programme “Economics of Climate Change”.

Methods

The authors have applied an input-output-based macro econometric-model, adjusting it to cope with the (1) challenges of damages from extreme weather events and (2) adaptation measures. Infrastructure damages, shifts from domestic production to imports, low levels of productivity due to heat waves, and adaptation measures are some of the topics the paper deals with. Crude data is the largest challenge we have to cope with. Results are obtained by a comparison of three scenarios – one with and one without considering extreme weather events, and finally a third one allowing for adaptation measures. These results are differences in the values of macroeconomic variables, such as GDP, exports, investment and employment as well as sector specific variables. For instance employment on the level of different economic sectors is an important indicator for the design of the appropriate adaptation measures.

Results

Extreme weather events exert slightly negative effects on economic sectors and Germany’s economy as a whole. These effects intensify over time and hurt the economy. Adaptation measures reduce the damages and pay off, but the economy is still worse off with climate change. The paper provides details for economic sectors and the total economy.

Conclusions

The research on the feasibility of the IO type macro econometric model for the analysis of extreme weather events has shown that it is necessary to rethink some of the empirical evidence on reaction equations in a time series based model to model extremes in the future.

Given that Germany is in a moderately affected region, the larger challenges for an open economy as the German,  will lie in climate change along the international value chain.  A German adaptation strategy must consider this.

18:10

Economic evaluation on the impact and cost effectiveness of climate change adaptation strategies in crop production systems (using Structural Ricardian and Decision model): Case of Northern Shewea, Ethiopia

N. Mekonnenn (Ethiopian Economic Policy Reserach Institute, Addis Ababa, Ethiopia)

Abstract details
Economic evaluation on the impact and cost effectiveness of climate change adaptation strategies in crop production systems (using Structural Ricardian and Decision model): Case of Northern Shewea, Ethiopia

N. Mekonnenn (1)
(1) Ethiopian Economic Policy Reserach Institute, Poverty and Agriculture and Development Division, Addis Ababa, Ethiopia

Abstract content

Introduction and problems: To respond to the possible impacts of climate change smallholder farmers have been using different adaptation strategies. some of the major adaptation strategies in the Woreda include use of improved variety/early maturing, use of disease tolerant crops, use of irrigation, increased use of fertilizer,   use of soil and water conservation techniques, water harvesting, constructing flood control, building wind breaks etc (ibid). However, we hardly know about the economic impact of climate change adaption strategies in smallholders many of the literatures. In addition, given the limited coping capacity and resource constraint to further make investment on different adaptation strategies, we know very little about cost effectiveness of climate adaptation strategies in smallholder’s crop production system. The significant part of literature on climate change adaption focus on the determinants of adaption strategies rather than the economic impact of adaption strategies and their cost effectiveness at farm level.

Objectives: The general objective of this study is to identify policy relevant issues about the impact and cost effectiveness of climate change adaptation strategies among smallholders and by way to contribute to climate resilient agricultural development. The specific objectives of the study are: 1) To assess the economic impact of climate change adaptation strategies in the selected study area 2) To conduct cost effectiveness analysis on climate change adaptation strategies in smallholder’s crop production system.    

 

Methods: The data for the research was obtained from the survey of 350 Households in two districts of North Shewa Zone in 2014. The sample households were selected randomly. The sample size in each district was determined based on probability proportion to size. The districts included in the survey were Yaya Gullel, Hidha Abote and Derra districts. The specific study sites within the districts were 18 Kebeles. A structured questionnaire was used to interview the farmers. In addition, the research employed review of secondary data at zonal level (cliamte data, agriclture production data etc). 

Economic Models and result:  A Decision support model and a structural Ricardian model were used to estimate the economic impact of climate change adaption strategies on smallholders and the cost effectiveness of different adaptation strategies. Thus, a comparison was also made between different adaptation strategies practiced by smallholder farmers.  

The econometric results of the analysis show that adaptation to CC plays significant role in boosting food production and farm level income. In addition, the fact that the adaptation variable is positive and significant in the estimates of production model indicates that adoption of yield related adaptation strategies have vital importance in terms of ensuring food security of rural households. On the other hand, the cost effectiveness analysis ( cost effectiveness ratio) using the decision support model show that while some strategies like rain water harvesting, river diversion, use of disease tolerant crops are economically preferred strategies others are not.  

Recommendation:

  • If the interest of the farmers lay on the achieving Climate change at the ‘least cost’, then provision of rain water harvesting, river diversion, use of disease tolerant crops would be the preferred cost-saving strategy
  • If the farmers objective focused on “averting climate change impact ”, then increasing the acceptance rate of “the provision of improved crop varieties and fertilizer use ” to 62% and more should be the economical preferred strategy as compared to the other alternatives
  • National adaption programs should be designed and local adaptation measures should also be contextually be introduced at smallholder’s level so as that adaptation strategies can improve food production and farmers income under climate.

 

18:20

Climate Change and China's Agriculture: Impact and Adaptation

H. Jikun (Center for Chinese Agricultural Policy, Chinese Academy of Sciences, Beijing, China), J. Wang (Center for Chinese Agricultural Policy, Chinese Academy of Sciences, Beijing, China), X. Wei (Center for Chinese Agricultural Policy, Chinese Academy of Sciences, Beijing, China)

Abstract details
Climate Change and China's Agriculture: Impact and Adaptation

H. Jikun (1) ; J. Wang (1) ; X. Wei (1)
(1) Center for Chinese Agricultural Policy, Chinese Academy of Sciences, Beijing, China

Abstract content

China’s agricultural sector is expected to face challenges in the future mainly due to rising food demand and constraints of land and water, which will be worsened by impacts of climate change. Understanding the impact of and adaptation to climate change on agriculture is critically important for climate change policy. Acknowledging the large number of studies on climate change in the literature, the overall goal of this paper is to provide additional evidence on the impacts of and adaptation to climate change on agriculture in China.

 

Both econometric analysis and general equilibrium modeling are applied to analyze the direct and indirect impacts of climate change. The direct impacts on major crop yields are empirically estimated using provincial data collected over the past three decades. The impacts of severe drought and flood from extreme weather events on grain production are estimated based on a large scale farm survey in 9 provinces. The indirect impact of climate change on market price response is simulated using an integrated impact assessment model under different scenarios. We identified adaptation measures taken by local governments, communities, and farmers for reducing climate risk based on primary surveys that include 3330 households from 330 villages in 9 provinces, and assessed which are the major factors that facilitate farmers to implement these measures. We also assessed the effectiveness of different measures in reducing climate risk on crop production.

 

Econometric results show that the effects of temperature and precipitation on crop yields are statistically significant though they differ largely among crops. Increasing temperature has a negative impact on the yield of several major crops such as wheat, rice, cotton, and sugar, though it also has a moderate positive impact on maize and rapeseed yield. However, decreasing precipitation reduces the yields of most crops. The simulation results show that overall impact of climate change on agricultural production is negative, but much less so than the direct impact, because of responses from producers and consumers to changes in agricultural prices due to climate change. Moreover, if we consider the impacts of climate change in the rest of the world that affect China’s trade and therefore domestic production, climate change impact on China’s agricultural production will be further reduced.

 

Empirical results also show that there is a wide range of measures that can reduce climatic risks. Most of these measures are related to the water sector (e.g., water infrastructure) and farm management (e.g., crop or variety diversification, irrigation practices, adjusting field operation, etc.). Econometric analysis shows that public extension service (e.g., the provisions of early warning and prevention information), policy support (e.g., financial and technical support) against extreme weather events, and household assets such as households’ social capital and wealth can improve the ability of farmers in adapting to climate change. Several major measures in the water sector and farm management significantly reduce average crop yield loss and variance of crop yield due to extreme weather events.

 

This study concludes with several policy implications. While China’s agricultural sector will face greater challenges under climate change, there are a number of measures –particularly those related to the water sector, farm management, and agricultural markets– that can reduce the impact of climate change. As most of these measures are not new, enhancing the above measures in crops and regions that are adversely affected by climate risks and including this enhancement as one of major investment priorities in agricultural development programs are critically important in developing climate adaptation plans and policies.