Economic Evaluation of Climate Change Adaptation Projects

Book excerpt: This paper identifies key challenges and solutions for carrying out project-level economic analysis of adaptation to climate change, both stand-alone and integrated into broader development projects. Very few projects addressing adaptation thus far have been subject to in-depth and rigorous economic analysis for a variety of reasons, including a lack of guidance on how to deal with assessments of the impacts of climate change, as well as with estimating costs and benefits of adaptation under uncertainty. The paper focus is on the agricultural sector, where the impacts of climate change have the potential to disrupt the livelihoods of rural populations in many regions and where adaptation must be given urgent consideration. Nevertheless, some of the approaches discussed are suitable to projects in other sectors as well. Finally, robust decision making (RDM) can provide an alternative quantitative decision analytic method that avoids subjective probability assessments and scenario predictions. RDM creates hundreds or thousands of plausible futures, in the judgment of the analyst, that are then used to systematically evaluate the performance of alternative actions. This approach facilitates identifying the set of conditions under which any particular alternative adaptation performs well or poorly, according to various evaluation criteria based on the decision maker's judgment. The decision maker can identify 'robust' alternatives that, compared to other alternatives, perform reasonably well across a wide range of plausible futures.