Accessible Unlicensed Requires Authentication Published by De Gruyter January 13, 2015

Improving the practice of economic analysis of climate change adaptation

Jia Li, Michael Mullan and Jennifer Helgeson

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.


Corresponding author: Jia Li, U.S. Environmental Protection Agency, Climate Change Division, 1200 Pennsylvania Ave., N.W. (6207-A), Washington, DC, USA, Tel.: 202-343-9380, e-mail:

Acknowledgments

The authors thank Anne Grambsch, Fran Sussman, Michael Toman, Emma Zinsmeister, Jeremy Martinich, James McFarland, and two anonymous reviewers for their helpful inputs and suggestions on this paper.

Disclaimer: The views expressed in this paper are the sole responsibility of the authors and do not necessarily represent those of the U.S. Environmental Protection Agency (EPA) or the Organisation for Economic Co-operation and Development (OECD) or the governments of its member countries.

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Published Online: 2015-1-13
Published in Print: 2014-12-1

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