Change Adaptation. February Paul Watkiss.

Transcription

1 Analysis of the Economic Costs of Climate Change Adaptation February 2011 Paul Watkiss

2 Presentation Background and policy context Methodological issues and overlap with DRR Examples Europe EEA and climatecost ( eu) UK national adaptation economic assessment Africa to East AFrica

3 Why are we interested in the economics of adaptation? Global level Scale of adaptation and input to finance negotiation for developing countries National level National adaptation financing needs. / $$ National response, planning and prioritization. Regional to local level Design & assessment of adaptation policies, programs and projects (appraisal)

4 Noting different aggregation levels and objectives Aggregation scale varies from global to local Objectives of analysis varies from global negotiation to project economic appraisal need different outputs, tools and methods Separate issues and challenges between developed and developing countries Adaptation deficit in developing countries - not adapted to existing climate variability and especially extreme events.particularly important DRR Attribution between development versus climate change in developing countries - additionality in context of funding ODA versus climate.drr

5 UK. High level of current protection to risk Still residual flood and heat events (notably 2007:2003) But relatively low costs: optimal balance benefit:costs? Relatively low levels of impacts from future climate change Already very large number of drr, plus adaptation actions in place or planned Kenya/Tanzania. Very low level protection, climate sensitive economy Costs of periodic floods/droughts 5 10% GDP. Regular ENSO cycle Potentially high economic costs climate change, 1 2% GDP/yr by 2030 Large adaptation and development deficit

6 Evidence Base on Economics of Adaptation There remains a low - but growing - evidence base IPCC AR4 - information on adaptation costs and benefits quite limited and fragmented Quantitative information focused on a few sectors While knowledge of current costs, very little consideration in context adaptation Even less on benefits, especially in context of future climate attribution Most estimates focused on technical options Some issues of validation from regional to global to national to local. Ref: EEA, 2007; OECD, 2008: UNFCCC, 2009: EEA, 2010: ClimateCost, 2010

7 World Bank (2009) # Infrastructure Coastal zones World Bank (2009) # Water supply/flood protection UNFCCC (2007)* UNFCCC (2007) * $ Billion/ year Agriculture, forestry and fisheries Human health Extreme weather events year (2005 aptation cost (billions euros / y value)) SLR SLR 95% Mid 5% No 95% Mid 5% No A1B(I) E1 Annual total ad Present s s s Year Methods vary! Objectives vary!!

8 Emerging National Studies (Developing) Source Watkiss, 2010 for UNFCCC Large number of funded d studies (e.g. UNFCCC, World Bank, RECCs, UNDP, EC) Will help advance and validate (or not) the existing global estimates Imply high costs of adaptation and large increases in new and additional finance

9 Wide Range of Models/Methods Used: CCIVA Economic Integrated assessment models (IAM) Computable General Equilibrium (CGE) National Investment and financial flow (I&FF) analysis Bottom-up impact assessment Source Carter et al, 2007 Vulnerability based assessment Adaptation assessment Wide range of decision support approaches: e.g. risk assessment, cost-benefit analysis, cost-effectiveness, multi-criteria analysis

10 Wide Range of Methods in Use Economic Integrated assessment model (IAM) analysis South East Asia RECC Computable General Equilibrium (CGE) models Brazil RECC National level Investment and financial flow (I&FF) analysis --- UNFCCC / Sweden (07) Bottom-up impact assessment UK (06); PESETA (09) Vulnerability based assessment NAPAs Adaptation assessment Also alternative decision support approaches: e.g. risk assessment, cost-benefit analysis, cost-effectiveness, multi-criteria analysis Micronesia UK Netherlands (Routeplanner)

11 Methodological Basis: Theoretical Framework Simplified assessment of costs and benefits of adaptation 1) Socio-economic Change 2) Climate Change 3) Benefits of Adaptation b) With climate change b) ΔA Total ($) a) Future baseline ΔCC a) c) With adaptation Time Time Time Source: Adapted from Boyd R. and A. Hunt (2006) But translating this into practice is less simple

12 Methodological Base on Economics of Adaptation There are complex methodological challenges Approaches and methods for assessing costs and benefits are still evolving No consensus and some very difficult issues to address Adaptation versus DRR DRR primarily risk framework to address climate variability (probabilistic events) Lot of CC impact literature comes from DPSIR framework (trends) Best studies combine both

13 Methodological challenges with Adaptation Uncertainty Baselines Climate projections Reversibility, flexibility and adaptive management Uncertainty Time horizon and discount rates Non-monetary costs and benefits Adaptation mitigation linkages Cross-sectoral linkages E i id i t Economic Valuation Economic wide impacts Hard vs. soft adaptation Ancillary effects Public versus Private Limits of Adaptation Equity Equity Source Markandya and Watkiss, 2009

14 .Analysis is Evolving. Policy focus is changing Move from theoretical to practical Move from long-term to short-term (counter to model signal confidence) Increasing recognition that actually much more complex.. Large number of different types of risks, across many varied sectors Risk changing and evolving dynamically over time Adaptation about a process as well as an outcome (building capacity) And the need to address uncertainty..

15 What are we adapting to? Future effects of climate change depend on future scenario: 2 degrees? 4-5 degrees? 1.4 Sea level rise (m) Rahmstorf A1FI high-range A1B mid-range B1 low-range Year Source Nicholls et al for ClimateCost, 2010

16 What Level of Impacts? Future impacts of climate change depend on future scenario..and climate model (and impact method ). Impacts of sea level rise Europe people flooded 2.5 A1B(I) (5% to 95% range) ple at risk from flo ooding due to extre eme water levels (millio ons people / year) Peo E1 (5% to 95% range) No SLR rise Year Source Nicholls et al for ClimateCost, 2010

17 What Costs of Adaptation? Which in turn affects the potential adaptation costs (and benefits) Dykes and nourishment Risk of mal-adaptation Source Nicholls et al for ClimateCost, 2010

18 Additional complexity More complex when unbounded changes, e.g. floods sign can be different for single EAD (billion Eu uro) min avg max control 20s 50s 80s A1B Source Feyen et al ClimateCost, 2010

19 Higher uncertainty in developing countries current Dodoma Mwanza Kilimanjaro airport The figure shows the range (in blue) acrossnine alternative downscaled models, as the change in monthly rainfall by the 2050s, compared to current levels (in red) Mbeya Dar es Salaam Results vary with region and season with even differences (+/ ) in the sign of the projected change. g Source University of Cape Town, GCAP

20 Especially for extremes 10 year driest Source Shongwe, M.E., van Oldenborgh and van Aalst

21 But answer is not more climate modelling Or probabilistic assessment and expected values Comparison of changes in seasonal mean temperature and precipitation, summer and winter, by the 2080s under High emissions scenarios, from the UKCIP02 report (far left panels) and as projected in UKCP09 (10, 50 and 90% probability level). Source: UKCP09

22 Approach is changing Recognition of uncertainty. In considering action, need to recognise this, not ignore it. More complex to present to policy makers, but not a reason for inaction. Requires move from predict & optimise to decision making under uncertainty Aspects of flexibility, robustness and iterative decisions More focus on short-term (where rationale to act now) with grounding in existing policy and vulnerability and ensuring economic justification

23 Uncertainty and Economics Focus on priorities that make economic sense, given uncertainty and discounting 1. Building adaptive capacity, pilot actions (option value/value of information) 2. Focusing on short-term win-win, no regret or low cost measures justified by current climate, ancillary benefits or involving i minimal i cost (+ve B:C) 3. Identifying those long-term issues that require early pro-active investigation, e.g. Infrastructure, affected by future climate change Where long life-times for a decision and implementation Where major risks, lock-in or loss of option value (including irreversibility) Source extended from Downing and Watkiss, 2005

24 Detailed appraisal When considering detailed appraisal, recognise number of very different risks - combination of process and outcome based options Best approach will vary with problem type Option for Assessing Adaptation Adaptation Type Adaptive Capacity No regrets Longer-term priorities Formal cost-benefit analysis Non-formalised cost-benefit analysis Cost-effectiveness analysis Multi-criteria analysis Portfolio theory Pathway analysis Adaptive capacity assessment Risk management methods Scenario-based approaches Technological assessments Normative policy assessments Identifying learning in individuals/organisations Participatory techniques Social learning Source Hunt and Watkiss 2009

25 UK.. Economics of uncertainty translating through to policy Treasury guidance on decision making under uncertainty Use of real options, example with TE2100 National climate change risk assessment (CCRA) repeated every 5 years Accompanied by National Adaptation Economic Assessment Working from current existing risks..as well as future climate risks (CCRA) Working from a baseline of current and planned policies Focus on iterative decision making and adaptive management

26 UK Adaptation Economic Assessment Transfer information Continuous and ex post evaluation Define risk / problem type and consider objectives Order of magnitude of adaptation Adaptation assessment context Prioritisation (risks and sectors) Identification and classification of options Appraisal of options UK AEA Watkiss and Hunt, 2010

27 Classification : Moving to adaptation pathways Flow of decisions over time, with iteration Major climate signal and risks Possible thresholds Increasing climate signal and rising risks Risks Current risks Climate variability Future cycles CCRA / NAP 2/3 Policy cycles Current CCRA / NAP 1 Decisions with long planning time Long-term Review Research Pilots Decisions with long-life time Ada aptation optio ons Short-term Building capacity Win-win No regrets Low cost Monitoring Training Awareness Research Education Other Evaluation Decision information Policy cycle progress Evaluation Decision information Policy cycle progress Act now UK AEA Watkiss, 2010 Delay

28 Africa: East Africa Aggregate level, costs of adaptation Through to national adaptation planning Kenya / Tanzania / Rwanda Key issues of what include or exclude Future baselines and development (socio-economic change) Focus towards robustness and resilience

29 Costs of Adaptation to Current and Future Climate in Africa $Billion per year $50 Billion. Enhancing resilience for future investment Adaptation to Future Climate Change $40 Billion. Immediate priorities and capacity building $30 Billion. $20 Billion. $10 Billion. Accelerated Development Social Protection Adaptation to Current Climate (development) but essential for future resilience UNEP, 2010

30 Ensemble of adaptation options Limits of adaptation, e.g. migration Costs Sectoral Climate Protection Natural resource management Pilot Actions Downing et al, 2009

31 Strong overlaps DRR and adaptation Coastal flooding. Need for short-term monitoring, disaster risk reduction Spatial planning (development controls) and integrated coastal management A1B A2 '000,000 of USD Agriculture. Enhanced resilience to current as well as future climate 10 0 Irrigation SWC Research Extension Rural Roads Low cost, no regret measures Watkiss et al, 2010

32 Research priorities Economics, costs and benefits of adaptation Decision making under uncertainty Placing DRR within wider framework of adaptation and no regret / resilience Atttribution methods?