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Tuesday, September 15, 2009

Economics of Climate Adaptation Working Group

The Economics of Climate Change Working Group has released its framework for the analysis of the costs of adaptation. The report presents a methodology for the assessment of "'total climate risk', from the existing climate as well as from a range of future climate change scenarios, and it quantifies that risk in the context of existing development challenges." Media reports highlighted the big numbers associated with some of the framework's test cases (in China, Guyana, India, Mali, Samoa, Tanzania, the UK, and the US). For example, by 2030, the test cases suggest economic loses on the order of 1 to 12% of GDP due to development, rising to up to 19% in some areas after accounting for a 'high' climate change scenario. However, generally the test cases indicate that the effects of development outweigh the effects of climate change. The good news is that an estimated 40 to 68 percent of the expected economics losses can be avoided through adaptation measures.

The big question is whether any of these numbers are reasonable. For example, the climatic change anticipated in the early 21st century (say 2000 to 2030) is comparable to that which was observed over the previous century. If the world is as sensitive to climate change as what is indicated above, then this suggests there have already been substantial climate change-induced GDP losses in multiple global regions. If true, one could certainly argue that the global economy at least has largely absorbed these adverse effects of climatic change (although certainly there are a few regions that would disagree). Interestingly, the numbers above also suggest that some fraction of economic development must inevitably be written off to cover the costs of greater exposure to climate hazards. So the key to maximising global economic growth is to ensure we live in well-adapted world.

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