Download all Technical Policy Briefing Notes in a single ... - Mediation

Cost-Effectiveness AnalysisThis does highlight a particular issue for theapplication of CEA to adaptation, namely that itcan be often be difficult to identify a singlecommon metric for analysis, because there aremany types of risks across and even betweensectors. In the case of sea level rise for example,using a headline metric of the number of peopleat risk, or an objective of acceptable levels ofrisk, will omit consideration of coastal erosionand coastal ecosystems. This means such a CEAwill not consider all relevant costs and benefitsfor coastal adaptation and may not identify themost holistic option. For this reason, CEA is lesssuitable for complex or cross-sectoral risks.The second key area identified in the applicationof CEA to adaptation is the consideration ofuncertainty, one of the key areas of investigationin the MEDIATION review.Most previous CEA applications, e.g. in areassuch as environmental policy and mitigation,ignore uncertainty, presenting single cost curves.Early applications of CEA to adaptation havealso followed this approach, largely presentingindividual cost curves, or at best, a few costcurves (each representing a central estimate fora different emission scenario, or a central andhigh scenario). As highlighted in Policy Note 1,the use of central estimates for future climatechange assessments can often providemisleading results for adaptation.Indeed, the range of climate model outputs for agiven scenario, whether from the degree oftemperature change, or for precipitationprojections where even the sign of the change isuncertain, will alter the cost-effectiveness ofoptions, their relative CEA ranking, and their totaleffectiveness and the cost curve. It is possible toaddress this by sampling across multiplescenarios/model outputs, or using stochasticapproaches, but this has resource implications.Strengths and WeaknessesA key part of the MEDIATION project has been toidentify the strengths and weaknesses ofdifferent approaches.The key strength of CEA is that it avoidsvaluation of economic benefits, enhancingapplicability where valuation is difficult orcontentious (e.g. ecosystems). The approach isalso relatively simple to apply, and thecommunication of results is concise and easy tounderstand – helped by the widespread use ofCEA in mitigation.The potential weaknesses relate to the need tochoose a single common cost-effectivenessmetric and the consideration of uncertainty (seeprevious section). These are both critical issuesfor adaptation. It is also highlighted that theanalysis of adaptation benefits (effectiveness) isKey strengthsBenefits expressed in physical terms, thereforedoes not require monetary valuation of benefits.Increases applicability to non-market sectors.Relatively simple approach to apply and provideseasily understandable ranking and outputs thateasy to understand.Frequently used for mitigation, and thus approachwidely recognised and has resonance with policymakers.Use of cost curves can assess different policytargets and how to achieve these at least cost,look at how to achieve greatest benefits foravailable resources, or look at the costimplications of progressively more ambitiouspolicies.Potential weaknessesOptimises to a single metric, which can bedifficult to pick. Less applicable for cross-sectoralor complex risks.The focus on a single metric omits importantrisks, and does not capture all costs and benefits(attributes) for option appraisal.Tends to work best with technical options, andcan therefore omit or give lower priority tocapacity building and soft (non-technical)measures. Sequential nature of cost curvesignores portfolios of options and inter-linkages.Does not lend itself to the consideration ofuncertainty and adaptive management, tending towork with central tendency.5