New report says many adaptation measures can be half as expensive as doing nothing

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Not only that, but doing nothing, thus further incurring myriad risks associated with climate change, could cost nations up to one-fifth (19%) of their GDP by 2030, with developing countries most vulnerable, according to a new report from the Economics of Climate Adaptation Working Group, created by the World Bank’s Global Environment Facility and the UN Environment Programme.  The report says that some cost-effective adaptation measures already exist—some that are half as expensive as the eventual cost of inaction on climate change—and can prevent between 40 and 68 percent of the expected economic loss.  Even higher levels of prevention are possible in certain areas, according to the report.  As we debate climate legislation and head for international climate negotiations in Copenhagen, this report is a must-read for US policymakers—including President Obama, who so far has not warned US residents of the hazards and costs associated with unchecked climate disruption. 

post by Anne Polansky

The report, Shaping Climate-Resilient Development (full report in .pdf (164 pp., 6MB), or Exec Summary) was prepared by a group of experts from Swiss Re, a leading global reinsurer, and McKinsey & Company, a global management consulting firm.  They employed what they say is a rigorous and replicable methodology to identify and assess the risks that climate change imposes on economies worldwide, and that the methodology can be used in any setting where society must consider risk.  “It provides a set of tools for decision makers to adopt a tailored approach for estimating these costs based on local climate conditions, and for building more resilient economies,” according to Swiss Re’s press announcement.

“By determining a location’s total climate risk – calculated by combining existing climate risks, climate change and the value of future economic development – and using a cost-benefit analysis to create a list of location-specific measures to adapt to the identified risk, the Working Group was able to evaluate current and potential costs of climate change and how to prevent them,” Swiss Re’s media release says. 

McKinsey & Company’s announcement explains:

“The aim of this report is to provide decision-makers with a systematic way of answering these questions. Focusing specifically on the economic aspects of adaptation, it outlines a fact-based risk management approach that national and local leaders can use to understand the impact of climate on their economies – and identify actions to minimize that impact at the lowest cost to society.

Sponsorship and key guidance was provided by ClimateWorks, an international network of foundations focused on achieving low-carbon development; the European Commission; the Rockefeller Foundation, which brought its experience with building climate resilience in developing countries; and Standard Chartered Bank, a global bank with a strong emerging market footprint.

The methodology was applied in specific geographic areas in eight countries—China, the United States, Guyana, Mali, the United Kingdom, Samoa, India, and Tanzania—areas representing a wide range of climate hazards, economic impacts, and development stages.  The working group estimated expected economic loss for these eight regions under three climate change scenarios for the year 2030: 
1) today’s climate conditions—assuming a continuation of historical climate patterns with no additional climate change, in the context of expected economic growth 2) moderate climate change—the average predicted or projected impact, among all available studies and interviews of experts, for the particular hazard being studied, e.g. wind speed during a hurricane; and 3) “high” climate change, based on the upper brackets of climate change impacts considered possible by 2030, as presented in existing studies and experts consulted.  (See page 37 of the report.)

Overall findings from the eight case studies showed that easily identifiable and cost effective measures – such as improved drainage, sea barriers, and improved building regulations, among many others – could reduce potential economic losses from climate change for all regions. In fact, most could deliver economic benefits that far outweigh their costs – with adaptation measures that on average cost less than 50 percent of the economic loss avoided. (emphasis added)

Four overarching findings are reported in the Executive Summary:

The first is that, despite much uncertainty about the possible effects of global warming on local weather patterns, society knows enough to build plausible scenarios on which to base decision-making.  This is true even in developing countries, where historical longitudinal climate data may be limited. Using such scenarios helps decision-makers identify adaptation measures that would be useful against a range of climate change outcomes.  (emphasis added)  CSW comment:  This finding refutes a common denialist claim that too much uncertainty regarding local and regional impacts precludes policy responses to mitigate or invest in adaptation measures. 

The second finding is a sobering one: significant economic value is at risk.  If current development trends continue to 2030, the locations studied will lose between 1 and 12 percent of GDP as a result of existing climate patterns, with low income populations such as small-scale farmers in India and Mali losing an even greater proportion of their income. Within the next 20 years, climate change could worsen this picture significantly: in the locations studied, a scenario of high climate change would increase today’s climate-related losses by up to 200 percent as soon as 2030.

Thirdly, however, the cases found that a portfolio of cost-effective measures can be put together to address a large part of the identified risk. In principle, between 40 and 68 percent of the loss expected to 2030 in the case locations – under severe climate change scenarios – could be averted through adaptation measures whose economic benefits outweigh their costs – with even higher levels of prevention possible in highly targeted geographies. These measures include infrastructure improvements, such as strengthening buildings against storms or constructing reservoirs and wells to combat drought; technological measures, such as improved fertilizer use; systemic or behavioral initiatives, such as awareness campaigns; and disaster relief and emergency response programs. Risk transfer or insurance measures also play a key role in addressing low-frequency, high-severity weather events such as once-in-100 year floods. However, in most cases there remains a proportion of climate-related risk that cannot be averted through known adaptation measures – underlining the fact that adaptation, no matter how well designed, cannot be a substitute for action to reduce carbon emissions and slow the rate of global warming. (emphasis added) 

Finally, the cases reinforced the view that adaptation measures are in many cases also effective steps to strengthen economic development – especially in developing countries. In Mali, for example, the implementation of climate-resilient agricultural development could potentially bring in billions of dollars a year in additional revenue. Measures with demonstrated net economic benefit are also more likely to attract investment – and trigger valuable new innovations and partnerships. Indeed, well-targeted, early investment to improve climate resilience – whether in infrastructure development, technology advances, capacity improvement, shifts in systems and behaviors, or risk transfer measures – is likely to be cheaper and more effective for the world community than complex disaster relief efforts after the event.  (See CSW’s related post September 18.) 

The case study for the US focused on the hurricane risk in three counties in Florida:  Broward, Miami-Dade, and Palm Beach, the three most hurricane-prone counties in the state, and large population and economic centers. Key findings include:

• Florida can expect an annual expected loss of $33 billion from hurricanes – more than 10 percent of GDP – under a high climate change scenario, and $30 billion under a moderate scenario.  However, Florida is already at risk from hurricanes in today’s climate conditions, to the tune of $17 billion.  Losses are mostly a result of damage from the high winds, storm surges, and driving rain associated with tropical cyclones. 

• Florida could offset more than half of its expected loss by employing measures that have net economic benefits.

*  However—despite measures taken, it is unlikely that Florida could avert more than 40% of the expected losses, unless economic development patterns, now concentrated along the coast, are shifted to less vulnerable areas in the state.  This finding underscores the need to ameliorate climate change through aggressive emissions reductions world-wide to bring down atmospheric concentrations of greenhouse gases.   

• Cost-effective adaptation measures include beach nourishment (adding more sand to beaches to help buffer the land from ocean storms; stronger building codes requiring more secure roof attachment and raising buildings off the ground; removing trees, branches, and other vegetation close enough to buildings to damage them during a hurricane; and protecting against flood damages by building water intrusion barriers around homes and communities. 

Many cities, towns, rural communities, and states are all making great strides in dealing with the climate threat, by enacting measures to reduce GHG emissions and by implementing cost-effective adaptation responses.  For example, a report released this week by American Rivers, Natural Security: How Sustainable Water Strategies Prepare Communities for a Changing Climate (full report (3.6 MB), .pdf) profiles eight forward-looking cities across the US that have taken critical steps in the area of water management to build in resiliency against four aspects of climate impacts:  public health, extreme weather, water supply, and quality of life.  (The report does not, however, articulate a federal role in helping other communities to follow suit.) 

The vast majority of communities and locales in the US are poorly prepared for climate change impacts and will require guidance, technical support, and additional funding to build in the needed resiliency in the face of a climate-disrupted future.  The House climate bill (Waxman-Markey, HR 2454) has good provisions on some aspects of the adaptation problem.  But the US government has not yet adequately warned the public of the hazards and costs of inaction, or established the federal framework needed to assist communities in boosting climate change preparedness.  It is time to do so, with or without a climate bill. 

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