24 March 2020, Honduras & Ethiopia

Storms, floods, droughts and other extreme weather events can threaten cities, regions and entire nations. As economies improve and population increases in the world’s most exposed regions, our climate continues to change, making them more vulnerable to losses from natural catastrophes. Many different approaches have already been designed responding to the complexity and uncertainties of climate-related impacts and aiming to strategize to address them. From a pool of options, such as climate vulnerability assessments, risk assessments, economic and/or sustainability impact assessments, to decision-making support tools, none have been successful at integrating all these processes to create a comprehensive climate risk management system and therefore ensure a climate-resilient development.

Aiming at bridging this gap, the Economics of Climate Adaptation (ECA) offers an innovative framework that enables national and local policy and decision makers to identify and quantify the risks that climate change poses to their economies and societies, and to formulate adaptation strategies with cost-efficient climate change adaptation measures. ECA supports policy and decision makers in selecting the most appropriate investments, which will protect key assets and economic activities to increase their resilience against impacts and consequences of current and projected future climatic conditions.

ECA addresses the following key questions to develop an effective climate adaptation strategy:

1. What is the potential climate-related damage over the coming decades?

2. How much of that damage can be averted, using what type of adaptation measures?

3. What investments will be required to fund those measures – and will the benefits of these investments outweigh the costs?

How does the Economics of Climate Adaptation (ECA) work?

The ECA framework can assess the risk of a variety of climate-related events in urban and rural contexts, on national or subnational levels, and propose a portfolio of suitable measures to address such risks based on cost effectiveness. The framework considers future scenarios of climate change as well as socio-economic development, modelling the expected benefits of different adaptation measures, including blue, green, grey and hybrid options, to support decision makers select the right measures for their specific conditions.

Specifically, ECA offers a systematic, flexible and transparent approach supported by the quantitative modelling tool “CLIMADA”, which:

• Simulates hazards: incorporating historical damages, historical met-series and remote sensing data to produce hazard maps
• Identifies spatial distribution and monetary values of different assets: persons, housing, roads and ecosystems, among others, which can be clustered by sectors
• Estimates damage functions: capturing the relationship between the intensity of an event and its economic consequences on key assets
• Recommends different adaptation measures, based on cost-benefit criteria and ranked in terms of efficiency: cross-referencing existing and planned adaptation measures, with the recommended adaptation measures, analysing construction and maintenance costs, location and effects on key assets

ECA fosters trust and initiates in-depth inter-sectoral stakeholder discussions. The methodology can be flexibly applied from national- down to local-level, to different sectors and different hazards. It provides key information for climate adaptation programmes, risk transfer approaches and has the potential to support international agendas such as the development of National Adaption Plans (NAPs).

The United Nations University – Institute for Environment and Human Security (UNU-EHS) is currently conducting ECA Studies in Honduras and Ethiopia, in close collaboration with ETH Zürich. The project is funded by the InsuResilience Solutions Fund (ISF) on behalf of the German Development Bank (KfW) and the German Ministry for Development Cooperation (BMZ).

Source: UNU-EHS