Download Climate Change Impacts and Adaptations

The Economics of Climate
Change Adaptation
Bangkok September 2013
Robert Mendelsohn
Yale University
What is adaptation?
• Change in behavior in response to climate
change.
• Examples: avoid running in hot weather,
buy air conditioning, change to heat-loving
crops, adjust water management, control
disease causing pests, build sea wall
Economics of Adaptation
• Maximize net benefits (benefits minus
costs) given that local climate has
changed
• Match to local climate change impacts
• Only do adaptations if the benefit exceeds
the cost
Timing
• Done too soon, adaptations can raise costs and
be ineffective (plant new crop before warm
enough to grow well- build sea wall long before
needed)
• Done too late, damages can be large (as if there
is no adaptation)
• Because adaptation actions must wait for
potential damages, the bulk of adaptation
actions need to be done in the second half of
this century
Private Adaptation
• Action taken to benefit self
– self interest to perform
– will be done without help
• Examples:
– Farmer switching crop and animal species
– Household adopting cooling (a fan or air
conditioner)
– Firm adjusting production as water becomes
scarce
Public Adaptation
• Actions taken to benefit many (jointly
consumed)
• Examples
– Conservation
• Benefit all who like nature
– Flood control planning
• Benefit people subject to floods
– Sea walls
• Protects all behind the wall
What adaptation will markets
do?
• Firms will conduct private adaptations for
their own benefit
– Farmers will adapt
• Market will not do public adaptations
– No mechanism to earn profit
• Market will not overcome externalities
such as pollution
• Market will perform badly without property
rights
What should governments do?
• Help create setting to encourage markets
and private ownership of private resources
– Transform common property
– Enforce private property rights
• Help do public adaptations (shared
benefits, externalities)
• Address fairness of impacts
Severe Weather Events
• Can adapt now to hurricanes, droughts,
floods because current problem
• Severe events likely to cause more
damage in the future as economy grows
• Greenhouse gases may make some
severe weather worse
What adaptation can be done now?
• Adapt to current weather
• Do planning and research to get ready
• Encourage institutional changes: improve public
management and markets for natural resources
(land, water, fisheries)
• Help the economy of developing countries grow
and become less dependent on climate sensitive
economic sectors- namely agriculture