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Key Messages• There is increasing interest in the appraisal ofoptions, as adaptation moves from theory topractice. In response, a number of existingand new decision support tools are beingconsidered, including methods that addressuncertainty.• The FP7 MEDIATION project has undertaken adetailed review of these tools, and has testedthem in a series of case studies. It hasassessed their applicability for adaptation andanalysed how they consider uncertainty. Thefindings have been used to provideinformation and guidance for the MEDIATIONAdaptation Platform and are summarised in aset of policy briefing notes.• One of the tools that has been widely appliedto climate change mitigation, and is alsobeing considered for adaptation, is Cost-Effectiveness Analysis (CEA).• CEA can be used to compare and rank therelative attractiveness of different options, andto identify the least cost combination ofoptions to achieve pre-defined targets usingcost curves.• CEA has been widely used in climate changemitigation. However, the MEDITION reviewhighlights the application to adaptation ismuch more challenging. This is becauseadaptation is a response to many local,regional or national level impacts, rather thanto a single global burden, i.e. there is no singlecommon metric. The application of CEA toadaptation is therefore much moredemanding, in terms of analysis detail andresources.• A key issue for CEA is the choice of costeffectivenessmetrics. The MEDIATION reviewhas identified a set of potential metrics bysector, however, it is stressed it can bedifficult to pick these, especially whenconsidering complex or cross-sectoral risks.• Further, most applications of CEA do notconsider uncertainty, working with single costcurves. However, the use of central estimatesfor future climate change is notrecommended. For adaptation, uncertaintyhas the potential to alter the ranking ofoptions and the overall cost curve, and thusneeds consideration.• The review has considered the strengths andweakness of the approach for adaptation.• The key strength of CEA is that it avoidsvaluation of economic benefits, and can thusbe used where valuation is difficult orcontentious (e.g. ecosystems). The approachis also relatively easy to apply, and the resultsare concise and easy to understand.• The potential weaknesses relate to the use ofa single common metric and the considerationof uncertainty, both critical issues foradaptation. Further, CEA tends to focus ontechnical options, and often omits capacitybuilding and non-technical options, while thelinear sequencing adopted contradicts theadaptation focus on portfolios of options andinter-linkages.• Previous applications of CEA to adaptationhave been reviewed, and a case study ispresented for the biodiversity in Finland.• The review and case studies provide usefulinformation on the types of adaptationproblem types where CEA might beappropriate, as well as data needs, resourcerequirements and good practice lessons.• The review identifies CEA is most useful fornear-term assessment, particularly foridentifying low and no regret options, in areaswhere monetary valuation is difficult. It is mostapplicable where there is a clear headlineindicator and where climate uncertainty is low.• A number of good practice lessons arehighlighted. The most important of these areto ensure that adaptation CEA does not focusonly on technical options, and that itconsiders uncertainty through multiple costcurve analysis. Furthermore, the need toconsider all attributes of options ishighlighted. Finally, it is considered goodpractice to undertake CEA within an iterativeplan, to capture enabling steps, portfolios andinter-linkages, rather than using the outputsas a simple technical prioritisation.
Cost-Effectiveness AnalysisIntroductionThere is increasing policy interest in the appraisalof options, as adaptation moves from theory topractice. At the same time, it is recognised thatthe appraisal of climate change adaptationinvolves a number of major challenges,particularly the consideration of uncertainty. Inresponse, a number of existing and new decisionsupport tools are being considered for adaptation.The European Commission FP7 fundedMEDIATION project (Methodology for EffectiveDecision-making on Impacts and AdaptaTION) islooking at adaptation decision support tools, inline with its objectives to advance the analysis ofimpacts, vulnerability and adaptation, and topromote knowledge sharing through aMEDIATION Adaptation Platform (http://www.mediation-project.eu/platform/). To complementthe information on the Platform, a series of PolicyBriefing Notes have been produced on DecisionSupport Methods for Climate Change Adaptation.An overview of all the decision support toolsreviewed is provided in Policy Briefing Note 1:Method Overview, which summarises eachmethod, discusses the potential relevance foradaptation and provides guidance on theirpotential applicability. The methods consideredinclude existing appraisal tools (cost-benefitanalysis, cost-effectiveness analysis and multicriteriaanalysis), as well as techniques that morefully address uncertainty (real options analysis,robust decision making, portfolio analysis anditerative risk (adaptive) management). It alsoincludes complementary tools that can assist inadaptation assessment, including analyticalhierarchic processes, social network analysisand adaptation turning points. Additionalinformation on each method is presented in aseparate Policy Briefing Notes (2 – 10).This Policy Brief (Note 2) provides a summary ofcost-effectiveness analysis. It provides a briefsynthesis of the approach, its strengths andweaknesses, the relevance for adaptation, how itconsiders uncertainty, and presents case studyexamples. It is stressed that this note onlyprovides an overview: more detailed information isavailable in MEDIATION deliverables, and sourcesand links on the MEDIATION Adaptation Platform.Description of the MethodCost-Effectiveness Analysis (CEA) is a widelyused decision support tool. It comparesalternative options for achieving similar outputs(or objectives). In this regard it is a relativemeasure, providing comparative informationbetween choices. It has been widely used inenvironmental policy analysis, because it avoidsmonetary valuation of benefits, and insteadquantifies benefits in physical terms.At the technical or project level, CEA can beused to compare and rank alternative options. Itdoes this by assessing options in terms of thecost per unit of benefit delivered, e.g. cost pertonne of pollution abated. This identifies thoseoptions that deliver highest benefit for lowestcost (i.e. the most cost-effective). As well asranking different options, such an analysis canbe used for benchmarking, see box.At the project, policy or programme level, wherecombinations of options are needed, CEA can beused to assess the most cost-effective order ofoptions, and so identify the least-cost path forachieving pre-defined policy targets. This isBox 1. Benchmarking using CEACost-effectiveness analysis can be used to benchmark options, i.e. by setting thresholds. Thisapproach is often used in considering new treatments in health service provision (e.g. in the UK),where the clinic effectiveness of new interventions are compared against a cost-effectivenessthreshold, measured as the cost (£) per Quality Adjusted Life Year (QALY). New treatments or drugsare considered cost-effective if they are lower than £20 000 to £30 000 per QALY (NICE, 2010). Suchan approach is needed because publicly funded healthcare systems cannot pay for every newmedical treatment that becomes available. As there are limited resources, choices have to be made,cost-effectiveness analysis helps provide the largest benefits with the available resources.1
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Adaptation Turning PointsLeary, D.
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