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Improving the practice of economic analysis of climate change adaptation

Published online by Cambridge University Press:  17 April 2015

Jia Li ,
Michael Mullan  and
Jennifer Helgeson
Michael Mullan
Affiliation:
The Organisation for Economic Co-operation and Development, Environment Directorate, Paris, France
Jennifer Helgeson
Affiliation:
The Organisation for Economic Co-operation and Development, Environment Directorate, Paris, France; London School of Economics and Political Science, Department of Geography and Environment, London, UK; and The Grantham Research Institute on Climate Change and the Environment, London, UK
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Abstract:

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The development of national and sectoral climate change adaptation strategies is burgeoning in the US and elsewhere in response to damages from extreme events and projected future risks from climate change. Increasingly, decision makers are requesting information on the economic damages of climate change as well as costs, benefits, and tradeoffs of alternative actions to inform climate adaptation decisions. This paper provides a practical view of the applications of economic analysis to aid climate change adaptation decision making, with a focus on benefit-cost analysis (BCA). We review the recent developments and applications of BCA with implications for climate risk management and adaptation decision making, both in the US and other Organisation for Economic Co-operation and Development countries. We found that BCA is still in early stages of development for evaluating adaptation decisions, and to date is mostly being applied to investment project-based appraisals. Moreover, the best practices of economic analysis are not fully reflected in the BCAs of climate adaptation-relevant decisions. The diversity of adaptation measures and decision-making contexts suggest that evaluation of adaptation measures may require multiple analytical methods. The economic tools and information would need to be transparent, accessible, and match with the decision contexts to be effective in enhancing decision making. Based on the current evidence, a set of analytical considerations is proposed for improving economic analysis of climate adaptation that includes the need to better address uncertainty and to understand the cross-sector and general equilibrium effects of sectoral and national adaptation policy.

Keywords

benefit-cost analysisclimate change adaptationeconomic analysis
Type
Research Article
Information
Journal of Benefit-Cost Analysis , Volume 5 , Issue 3: Special Issue: Perspectives on Implementing Benefit-Cost Analysis in Climate Assessment , December 2014 , pp. 445 - 467
Copyright
Copyright © Society for Benefit-Cost Analysis 2014

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