Adapting to Climate Change: Assessing the World Bank Group ...

Appendix FAnalytic Work on Climate AdaptationF1. The Economics of Adaptation to Climate ChangeA World Bank study on the economics of adaptation to climate change (World Bank2010) attempts to estimate the size of these costs at a global level. This is a herculeantask, considering the vast uncertainties in the effects of climate change and thedifficulties in quantifying the benefits and costs of adaptation actions. The studyestimates that a world that experiences warming of 2 degrees Celsius by 2050 wouldrequire adaptive actions costing $70 billion to $100 billion per year.The study’s approach is to select adaptation actions that will counteract the expectedimpacts of climate change on welfare in each sector analyzed—infrastructure,coastal zones, water supply and flood protection, agriculture, fisheries, humanhealth, and forestry and ecosystem services. The approach has several weaknesses.The calculation considers only “hard” investments and not institutional or policychanges, and considers only public adaptation actions, and not private adaptation.The calculation assumes that planners have perfect foresight, and so can select theoptimal actions to adapt to a wetter or drier scenario. And the calculation cannotincorporate cross-sectoral substitution; it requires that welfare in each sector berestored, even though an optimal response might encourage a shift out of sectorsthat are hit hard in particular countries.Despite these challenges, the approach highlights a critical point; what matters isimproving welfare, not directly trying to counteract the specific impacts on climatechange. The study concludes that general development is perhaps the best form ofadaptation; that current adaptation actions should focus on “low regret” optionsthat reduce adaptation deficits; and that investment projects that are highlyvulnerable to uncertainty about the future climate state should be delayed untilmore information is available.But the inherent methodological challenges faced by the researchers suggest thatwhile this study was worthwhile to provide an order of magnitude estimate, thegains from continuing to try to produce further estimates at the global level arelikely to be modest. Future Bank support for cost and vulnerability estimates islikely to be more effective at the national or subnational level (as in the case studiesperformed under the EACC study).119