Economics of adaptation to climate change

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Publication Date: 
18 April 2011
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This report is part of a broader global study, the Economics of Adaptation to Climate Change (EACC), which has two principal objectives: (a) to develop a global estimate of adaptation costs for informing international climate negotiations; and (b) to help decision makers in developing countries assess the risks posed by climate change and design national strategies for adapting to it.

The first part of the study - the "global track" - was aimed to meet the first objective. Using several climate and macroeconomic models, the global track (World Bank 2009) concludes that by 2020, the annual costs of adaptation for developing countries will range from $75 billion to $100 billion per year; of this amount, the average annual costs for Africa would be about $18 billion per year.

In order to meet the second objective, the study also commissioned a "country track" consisting of seven country-specific case studies. Mozambique was one of three African countries selected for the "country-track" study, along with Ghana and Ethiopia. The objective of the country track was both "ground-truthing" the global study and helping decision makers in developing countries understand climate risks and design effective adaptation strategies.

Approach

The three studies in Africa use similar methodologies. In accordance with the broader EACC methodology, climate change impacts and adaptation strategies were defined with regard to a baseline (without-climate change) development trajectory, designed as a plausible representation of how Mozambique’s economy might evolve in the period 2010–50 on the basis of historical trends and current government plans. The baseline is not a forecast, but instead it provides a counterfactual - a reasonable trajectory for growth and structural change of the economy in the absence of climate change that can be used as a basis for comparison with various climate change scenarios. Impacts are thus evaluated as the deviation of the variables of interest (economic welfare, sector development objectives, etc.) from the baseline trajectory in priority sectors. Adaptation is defined as a set of actions intended to reduce or eliminate the deviation from the baseline development path caused by climate change.

The impacts of climate change, and the merits of adaptation strategies, depend on future climate outcomes, which are typically derived from global circulation models (GCMs) and are uncertain, both because the processes are inherently stochastic and because the GCM models differ in how they represent those processes. Since scientists are more certain of likely patterns of temperature increase than of changes in precipitation, the work describes for Mozambique a "wet" and a "dry" scenario. In order to enable comparison with other countries, this report utilizes the two "extreme" GCMs used in the global track of the EACC (labeled "global wet" and "global dry"). However, a globally wet scenario is not necessarily wet in Mozambique. In fact, the global wet scenario projects a slight drying and the global dry is in fact somewhat wetter in Mozambique. Hence, two additional models - labeled "Mozambique wet" and "Mozambique dry" - were selected in order to represent the range of possible outcomes for Mozambique.

The Mozambique EACC study selected four sectors that are believed to be vulnerable to climate change: (1) agriculture, which employs over 70 percent of the population; (2) energy, particularly hydropower generation, which is dependent on water runoff; (3) transport infrastructure, notably roads; and (4) coastal areas, which do not conform to a "sector" but characterize specific geographical areas vulnerable to floods and storm surges directly and indirectly related to sea level rise.

The analysis developed growth paths "with climate change" incorporating climate shocks on priority sectors under alternative climate projections. The economic impact of climate change was assessed by comparing with a baseline trajectory labeled "without climate change." Finally, costs of adaptation measures required to offset the negative impacts of climate change were calculated both at the sectoral and economy level. The study also considered the social dimensions of climate change.

While this study is one of the most comprehensive studies looking into the implications of climate change for a low-income country to date, some impact channels were not considered. For example, the assessment did not include climate change impacts on ecosystem services or on the prevalence of malaria. The EACC study also did not consider a number of key adaptation strategies. Excluded were improved public awareness and communications; insurance mechanisms; wider access to weather information (that is, not related to the sectors mentioned), improved land use planning and management, such as improved building codes, not building on flood plains; regional watershed management; forest and woodland conservation; and mangrove and wetland conservation. These options have potentially very high returns. Nevertheless, the study does provide interesting results.

When identifying potential resilience measures to adopt, both "hard" infrastructure - such as sea walls, irrigation systems, and power generation and distribution - and "soft" policy options were considered. For example, road redesign proved to be one of the most powerful adaptation options considered. The study makes the point that, in the long run, adaptation strategies should not be limited to the sectors studied. The results of the study have to be qualified because of these limitations.