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ECONADAPT

The Economics of Adaptation

As adaptation moves from theory to practice, there is an increased need for more detailed economic analysis, including estimates of costs and benefits.  This need is recognised at the EU level, for example in the EU Strategy on Adaptation, as well by Member States. However, the economics of adaptation remains in its infancy, in relation to both the methodological challenges and examples of practical application.

Against this background, the objectives of the ECONADAPT project were to advance the knowledge and evidence base on the economics of adaptation, and to convert the findings into practical material to help support adaptation planning and decision makers. To help achieve these objectives, the project co-developed the research with policy makers, to ensure it was grounded in practice. This also encouraged final dissemination in a user-orientated form that was targeted towards end users.

The overall project approach was split into two major research themes:

1.     To make methodological advances to improve the economic assessment of adaptation.

 

2.     To apply these advances to major adaptation decisions, i.e. in policy areas where improved economic methods and tools are needed.

 

The first theme advances research on:

  • Improved methods and empirical data. This developed better methods for analysing data on the costs and benefits of adaptation and in doing so broadened the application to non-technical options and non-market sectors. It also explored treatment of risk and ambiguity, learning and option values, changing preferences, and adaptation-mitigation linkages in economic assessment. The research undertook primary valuation studies to survey preferences for alternative types of adaptation in three countries.

 

  • Scaling, transfer, aggregation. This assessed and produced guidance on how to transfer adaptation cost and benefit values from one study to another, taking account of time and location, and the issues in aggregation from local to macro-economic scales. 

 

  • Analysis of uncertainty. This addressed the problem of how to quantify uncertainty - extending existing methods and tools - and developing new ones.

 

The second theme applied these advances to key policy domains using case studies, focusing on five major areas where adaptation economics will be important over the next decade: 

 

  • Management of the early major risks of climate change in Europe.  This focused on extreme events, as these have high economic costs in the short-term.

 

  • Including adaptation into economic project appraisal, especially for large capital investment with long life-times and high exposure to climate change (and uncertainty).

 

  • Including adaptation in policy appraisal (impact assessment), especially where there are large flows associated with mainstreaming adaptation into major EU funding areas.

 

  • Identifying the macro-economic effects of adaptation within the EU and MS, including the effects on public finance, growth and competitiveness.

 

  • Developing methods of economic analysis to support EU/MS international development assistance for adaptation in developing countries.

 

The project undertook these case studies with stakeholders from relevant DGs, Member States, regional or local policy makers. The methods and case studies were therefore co-developed with user groups engaged in using economic data for adaptation decision making. A number of workshops were held in the study to help build these links, including a major series of case study-focused meetings early in the project to identify user-needs.

 

The results and findings from the project are brought together in a toolbox which provides guidance from the methodological tasks and examples from the case studies to help inform the application of the economic assessment of adaptation. A two-tier approach was applied, with detailed guidance and empirical data for economists, as well as ‘light-touch' methods and information for other users.

The ECONADAPT project has developed a policy led approach to frame the research and policy analysis. This focuses on the practical application of adaptation economics to near-term adaptation decisions for both the short- and the longer-term, using iterative risk management and prioritising low-regret options.

The project has collated the knowledge base on the costs and benefits of adaptation. This evidence has evolved significantly in recent years, with a greater coverage of risks, sectors and countries, though important gaps remain in many areas. More recent studies show the importance of considering uncertainty, as well as policy implementation costs.

The project has made methodological advances in a range of areas. It has developed adaptation economic methods for assessing adaptive capacity, undertaken primary survey work to understand public preferences for adaptation, and developed methods for the scaling, transfer and aggregation of cost and benefit values. The project has also applied decision making under uncertainty to adaptation economics, reviewing and producing summary information on methods, and undertaking example applications.

The ECONADAPT project has applied these methodological advances to a series of policy domains, considering the major priorities for adaptation economics over the next decade.

It has considered the bottom-up costs and benefits of addressing the increased frequency of weather related disasters from climate change, and complemented this with analysis of the fiscal consequences of climate change exacerbating current national level disasters.

It has developed guidance for economic project appraisal and undertaken practical case studies that consider river flooding and sea-level rise. 

It has also developed guidance for policy appraisal (impact assessment), looking at the development of mainstreaming with a case study in the agriculture sector. A key priority in both the project and policy appraisal studies has been to include decision making under uncertainty.

The project has looked at the wider economic effects of both market-driven and planned adaptation, undertaking macro-economic modelling to assess the economic consequences of adaptation from a top-down perspective.

It has also developed the project and policy appraisal frameworks for application in the developing country context, particularly in relation to international climate finance, and undertaken a series of practical case studies to demonstrate the application.

See the ECONADAPT Library and Toolbox for more project information, resources, methods, insights and guidance.

University of Bath GB
Ecologic Institute DE
Basque Centre for Climate Change ES
International Institute for Applied Systems Analysis AT
IVM Institute for Environmental Studies NL
Potsdam Institute for Climate Impacts Research DE
Euro-Mediterranean Center on Climate Change IT
Agricultural University of Athens GR
Danish Meteorological Institute DK
Wageningen University NL
University of East Anglia UK
Paul Watkiss Associates UK
Charles University Environment Center CZ
Joint Research Centre of the EC (IPTS) BE