The 1451 Review (Volume 1) 2021

The impacts of 2°C warming is estimated to be drastic (IPCC 2018; CAT 2019).
As we are on track to exceed 2.9°C, I would argue that current mitigation policies are
insufficient, which makes adaptation even more important (CAT 2019). As de Bruin et
al. (2009: 11) argue, ‘the near-term impacts of climate change are already “locked in”,
irrespective of the stringency of mitigation efforts thus making adaptation inevitable’.
Yet, policy makers and scholars devote considerably more attention on mitigation than
adaptation (Fankhauser; 2017). Hence this dissertation will focus on adaptation while
recognising mitigation as a crucial complement.
Adaptation Measures
Adaptation has been shown to be highly beneficial and adapting early may bear several
advantages compared to action later on. Benefits exceed costs by a wide margin for
various adaptation measures from enhanced meteorological services to sustainable
agricultural land management, with as high as a 5:1 cost-benefit ratio for flood-risk
management measures (Watkiss 2016).
Fankhauser (2017) explains why some adaptation action should be undertaken
earlier rather than later. Firstly, it may be cheaper to factor in climate change into
long-term decisions at the outset rather than adapting them later; this is especially
relevant to long-lived infrastructure since it may be more expensive to risk-proof or
retrofit already existing structures than to design resilient infrastructure to begin with.
Secondly, some solutions might bear early benefits as they are ‘win-win’ for both
adaptation and wider economic or environmental goals; especially true for ecosystembased
adaptation measures such as mangrove protection. Finally, some adaptation
measures such as capacity building may only provide benefits in the long run, and
therefore early investment is needed. Above all, ‘pursuing place-specific adaptation
pathways towards a 1.5°C warmer world has the potential for significant positive
outcomes for well-being in countries at all levels of development’ (IPCC 2018: 44).
Some adaptation can occur autonomously with funding from private sources.
In other words, households and firms change their behaviour, adapting to new
information about their environment (Fankhauser 2017). Private adaptation is
thought to be more efficient than public adaptation as both the benefits and costs
accrue to the same decision-maker; hence action is only taken when the benefits
exceed the costs (Mendelsohn 2012). However, this is only true under the assumptions
that there are no externalities, there is access to markets, private property rights exist
and perfect information is available (Mendelsohn 2012). If any one of these
assumptions is violated, market failure occurs, leading to sub-optimal adaptation
undertaken by the private sector.
Firstly, market failure exists because adaptation creates (local) public goods.
For example, the investment in a seawall creates positive spillovers for everyone living
in the area, although they have not paid for it (Stern 2007). The presence of positive
externalities leads to sub-optimal investment in adaptation by the private sector.
Secondly, climate change is characterised by deep uncertainties; current climate
information is subject to constant change. Furthermore, the level of uncertainty is
much higher for adaptation than mitigation, because of the uncertainty of climate
change impacts on the local level. There is also a lack of regional climate information,
which is most relevant for adaptation (Fankhauser 2017; Heal and Millner 2014).
Under imperfect information, it becomes impossible for actors to assess the costs and
benefits of adaptation accurately (Stern 2007). Thirdly, developing countries may lack
protection of private property rights, resulting in limited incentives to climate-proof
the property when the risk of losing the property is high (Mendelsohn 2012).
Finally, people in the Global South may lack access to capital. Adaptation often
requires a high upfront investment while developing countries tend to have general
scarcity of resources. With lacking access to capital markets and/or a high cost of
capital, investment in adaptation is unlikely to reach socially desirable levels (Stern
2007). Buhr et al. (2018: 4) show that vulnerability to climate change actually
increases the cost of capital in developing countries. In particular, they found that ‘for
every USD 10 paid in interest by developing countries, an additional dollar will be
spent due to climate vulnerability’. This would further exacerbate the capital
constraints on adaptation investment and adds to the current economic challenges in
developing countries.
Given the market failure, the state has an important role in providing
adaptation. Fankhauser and Soare (2013) suggest three roles for the government. The
government should a) create an environment that is conducive to private adaptation,
for example by enhancing the security of property rights, b) provide climate-resilient
public goods such as flood prevention measures, climate information services and
resilient public infrastructure, and c) assist vulnerable groups who cannot adapt
adequately themselves in order to minimise the implications of climate change on
inequality. However, due to the resource constraints Global South governments face,
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