KEY MESSAGES

In developed countries, adaptation will be required to reduce the costs and disruption caused by climate change, particularly from extreme weather events like storms, floods and heatwaves. Adaptation will also help take advantage of any opportunities, such as development of new crops or increased tourism potential. But at higher temperatures, the costs of adaptation will rise sharply and the residual damages remain large. The additional costs of making new infrastructure and buildings more resilient to climate change in OECD countries could range from $15 – 150 billion each year (0.05 – 0.5% of GDP), with higher costs possible with the prospect of higher temperatures in the future.

Markets that respond to climate information will stimulate adaptation amongst individuals and firms. Risk-based insurance schemes, for example, provide strong signals about the size of climate risks and encourage better risk management.

In developed countries, progress on adaptation is still at an early stage, even though market structures are well developed and the capacity to adapt is relatively high. Market forces alone are unlikely to deliver the full response necessary to deal with the serious risks from climate change.

Government has a role in providing a clear policy framework to guide effective adaptation by individuals and firms in the medium and longer term. There are four key areas:

• High-quality climate information will help drive efficient markets. Improved regional climate predictions will be critical, particularly for rainfall and storm patterns.

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