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Improving the practice of economic analysis of climate change adaptation

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  • Li, Jia
  • Mullan, Michael
  • Helgeson, Jennifer

Abstract

The development of national and sectoral climate change adaptation strategies is burgeoning in the US and elsewhere in response to damages from extreme events and projected future risks from climate change. Increasingly, decision makers are requesting information on the economic damages of climate change as well as costs, benefits, and tradeoffs of alternative actions to inform climate adaptation decisions. This paper provides a practical view of the applications of economic analysis to aid climate change adaptation decision making, with a focus on benefit-cost analysis (BCA). We review the recent developments and applications of BCA with implications for climate risk management and adaptation decision making, both in the US and other Organisation for Economic Co-operation and Development countries. We found that BCA is still in early stages of development for evaluating adaptation decisions, and to date is mostly being applied to investment project-based appraisals. Moreover, the best practices of economic analysis are not fully reflected in the BCAs of climate adaptation-relevant decisions. The diversity of adaptation measures and decision-making contexts suggest that evaluation of adaptation measures may require multiple analytical methods. The economic tools and information would need to be transparent, accessible, and match with the decision contexts to be effective in enhancing decision making. Based on the current evidence, a set of analytical considerations is proposed for improving economic analysis of climate adaptation that includes the need to better address uncertainty and to understand the cross-sector and general equilibrium effects of sectoral and national adaptation policy.

Suggested Citation

  • Li, Jia & Mullan, Michael & Helgeson, Jennifer, 2014. "Improving the practice of economic analysis of climate change adaptation," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 5(3), pages 445-467, December.
  • Handle: RePEc:cup:jbcoan:v:5:y:2014:i:03:p:445-467_00
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    1. Stern,Nicholas, 2007. "The Economics of Climate Change," Cambridge Books, Cambridge University Press, number 9780521700801, January.
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    1. Sussman Fran & Grambsch Anne & Li Jia & Weaver Christopher P., 2014. "Introduction to a special issue entitled Perspectives on Implementing Benefit-Cost Analysis in Climate Assessment," Journal of Benefit-Cost Analysis, De Gruyter, vol. 5(3), pages 333-346, December.
    2. María Guerrero-Hidalga & Eduardo Martínez-Gomariz & Barry Evans & James Webber & Montserrat Termes-Rifé & Beniamino Russo & Luca Locatelli, 2020. "Methodology to Prioritize Climate Adaptation Measures in Urban Areas. Barcelona and Bristol Case Studies," Sustainability, MDPI, vol. 12(12), pages 1-25, June.
    3. Paul Watkiss, 2015. "A review of the economics of adaptation and climate-resilient development," GRI Working Papers 205, Grantham Research Institute on Climate Change and the Environment.
    4. Weyant John, 2014. "Integrated assessment of climate change: state of the literature," Journal of Benefit-Cost Analysis, De Gruyter, vol. 5(3), pages 377-409, December.
    5. Sam Fankhauser, 2017. "Adaptation to Climate Change," Annual Review of Resource Economics, Annual Reviews, vol. 9(1), pages 209-230, October.
    6. Sussman, Fran & Grambsch, Anne & Li, Jia & Weaver, Christopher P., 2014. "Introduction to a special issue entitled Perspectives on Implementing Benefit-Cost Analysis in Climate Assessment," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 5(3), pages 333-346, December.

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