Economic analysis of adaptation, including costs and benefits, is subject to similar complications and limitations that beset quantitative economic analysis of climate change mitigation. To make such analysis relevant for policy decisions, the analysis must incorporate three factors that define the economics of climate change. The first is uncertainty, in particular the risk of abrupt climate change, which is a major reason for urgency in addressing climate change.

The second is improved calibration of economic climate change impacts, and the inclusion of non-market impacts. The third is equity and differential climate impacts at the fine scale, which will define adaptation actions in practice. Hence, there is a long road ahead in improving the tools for economic modelling of adaptation, and the mitigation-adaptation nexus.

Meanwhile, the crucial question for policy makers is not the benefit-cost ratio for adaptation in aggregate, but whether and where specific adaptation actions are beneficial, what new policies are needed to support adaptive action, and what existing policies need to be changed or scrapped.

(The above abstract is from a report written by Dr Frank Jotzo, ANU Climate Change Institute Deputy Director and Research School of Asia and Pacific academic. The report is called A Perspective Paper on Adaptation as a Response to Climate Change . It was prepared for the Copenhagen Consensus Center which has assembled an expert panel of five world-class economists – including three recipients of the Nobel Prize – to deliberate on which solution to climate change would be most effective.)

See Copenhagen Consensus Centre’s website here.

Download Dr Jotzo’s report here.

Photo by: Natalie Cheong - ANU Student
Caption:  Climate change means uncertainty for future generations. The expression through the eyes of this young child living in a fishing village aptly depicts an image of fear and uncertainty.
(This photo was an entry in the ANU Climate Change Institute’s CAPTURE: Climate Change Impacts photographic competition)