The Economics of Adaptation and Climate-Resilient Development

Although many developing countries are working on appropriate mechanisms for financing adaptation to combat climate-related problems, there is a great need for research and insight to support these efforts. This study will capture and synthesize lessons learned from research projects on the economic analysis of adaptation options to climate change: methodology, data, gaps, challenges, research capacity, and policy implications. Understanding the economics of adaptation Without research into the economics of adaptation, efforts to combat climate-related problems through financing suffer from a lack of understanding about the critical role for economics in appraising and designing adaptation interventions and policies at the local level. Economic appraisals of institutional and non-technical options, for example, are much harder to assess than technical infrastructural options. To add to the problem, developing countries have a high need for better water and energy infrastructure. Yet the uncertainty on the exact nature of climate impacts makes it difficult to ensure that correct decisions are made because they require advanced decision-making techniques. The economics of adaptation to climate change are less understood than the economics of mitigation. This means that there are very few locally available studies that analyze different adaptation measures from an economics perspective. Insights from IDRC research While IDRC's Climate Change and Water program has supported research in this area since 2010, there has been no comprehensive effort to document best practices and lessons learned in the field. This includes both IDRC-supported and non-IDRC projects. This assessment will help the development community better understand the estimates and trade-offs related to local-level adaptation to climate change. The project will advance research on the economics of adaptation and climate resilient development. Project methodology The micro-level analysis will assess the benefits and costs of individual adaptation options, taking climate uncertainty into account. The macro-level analysis will evaluate the link between: -economic development and adaptive capacity; -economic development and sensitivity to climate events; -access to better education and finance; and -adaptive capacity. Another important macro-level issue is the impact of climate change on the drivers of growth. More information is needed to understand factors that determine growth performance. The project team will undertake a systematic analysis to deepen understanding of the economics of adaptation and fill the knowledge gaps with particular emphasis on the water sector.