The Economics of Climate Adaptation

Helping communities prepare for climate change

Storms, floods, droughts and other extreme weather events can threaten cities, regions and entire nations. Losses from natural catastrophes are rising, as wealth accumulates in the world’s most exposed regions and our climate continues to change.

The good news is that up to 65% of climate risks can be averted. But we have to act now, and we have to act together. Only by combining risk prevention, risk mitigation and risk transfer measures as part of a comprehensive adaptation strategy, we will make urban and rural communities more resilient to the impacts of climate change.

Authored by the Economics of Climate Adaptation Working Group, Shaping climate-resilient development: a framework for decision-making, identifies significant potential for cost-effective adaptation measures. It presents a practical framework that national and local officials can use to quantify the risk that climate change poses to their economies, and to minimise the cost of adapting to that risk.

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ECA methodology answers three key questions

Adaptation measures are available to make societies more resilient to the impacts of climate change. But decision makers need the facts to identify the most cost-effective investments. Climate adaptation is an urgent priority for the custodians of national and local economies, such as finance ministers and mayors - as well as to leaders in the private sector. Such decision makers ask:

  • What is the potential climate-related loss to our economies and societies over the coming decades?
  • How much of that loss can we avert, with what measures?
  • What investment will be required to fund those measures - and will the benefits of that investment outweigh the costs?

The Economics of Climate Adaptation (ECA) methodology provides decision makers with a fact base to answer these questions in a systematic way. It enables them to understand the impact of climate change on their economies - and identify actions to minimise that impact at the lowest cost to society. It therefore allows decision makers to integrate adaptation with economic development and sustainable growth. Case studies in more than 20 different regions around the globe, ranging from Maharashtra in India to Florida and Northern England, showed that up to 65% of expected loss from climate change can be averted using cost-effective adaptation measures.

Barisal: helping a city prepare for climate change

Floods, cyclones and rising sea levels disrupt the lives of many people around the world. Communities will face more damage as urbanisation advances and our climate continues to change. Many towns and cities are unprepared for this future. Their floodwalls are too low, water supplies too fragile and drainage systems inadequate to deal with the impact of extreme weather. The question is how do we allocate the limited resources we have in the most effective way. To address this challenge, KfW, Swiss Re and Barisal City Corporation teamed up to develop an adaptation strategy for Barisal in Bangladesh. This will help the people there adapt to the impacts a changing climate will bring.

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New York City: Special Initiative for Rebuilding and Resiliency

After Hurricane Sandy in 2012, Mayor Michael Bloomberg announced "A Stronger, More Resilient New York", a comprehensive plan that contains actionable recommendations both for rebuilding the communities impacted by Sandy and increasing the resilience of infrastructure and buildings citywide. Swiss Re has been instrumental in providing it's proprietary Nat Cat models and expertise to assess the risk and to evaluate options to address the challenges.

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Swiss Re sigma 01/2014: Special chapter fostering climate change resilience

Climate change is a fact. Industrialization and human activity has led to a significant increase in greenhouse gas emissions which, alongside natural variability, have pushed global temperatures higher. Rising temperatures are expected to lead to more frequent and severe extreme weather events in the future. If no action to reduce greenhouse gas emissions is taken, these events are likely to become an increasingly important factor in the ongoing upward trend of total losses.

As this sigma report shows, along the US Gulf coast, for example, the economic loss potential of climate change may rise to USD 21.5 billion per annum by 2030. However, a number of cost-efficient adaptation measures are available, and these together could lower damages by 35%. Among the most attractive adaptation measures are beach nourishment, levees, roof cover retrofits and improved building codes.

Risk prevention and avoidance, and disaster risk  management measures can help build resilience to climate change. So too can risk transfer solutions, by providing financial relief after a disaster has struck. Risk transfer does not stand in isolation: it is an integral part of any climate adaptation strategy.

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