Our Perspectives

In adaptation, understanding economics is priceless


farmers in CambodiaIn Ou Village, Siem Reap Province villagers are trained in planting techniques and drip irrigation installation as part of a climate-proofing agricultural practices adaptation project in Cambodia. Photo: Narith Mao/UNDP Cambodia

What is the right policy or incentive to encourage climate change adaptation?

One could simply pick the one that is politically expedient and implement it. If it doesn’t work, make adjustments and try again. In many instances, this is exactly how public policy is defined, despite what is in textbooks or what best practice would suggest.

Clearly, this kind of reactive approach has its limits. It doesn’t necessarily result in the most economically efficient choices being made.

Understanding the economics of climate change adaptation is critical.  In a world with competing demands for limited resources, governments can ask critical questions to form the most efficient policy.

For instance, what is the magnitude of climate change impact on a sector like agriculture? To what extent will households that rely on agriculture be affected? Where are these changes expected? What kinds of interventions will have the highest return in terms of social welfare improvements? Where and when should the investments be made?

Adapt too soon, and the impacts may not be realized. Adapt too late and the investments are futile.

The problem is that these questions, critical for policy formulation, are not well understood in developing countries, largely due to under-financing of research and research institutes. Existing vertical funds such as the Global Environment Facility’s Least Developed Country Fund and Special Climate Change Fund have tried their best to accommodate empirical research.

However, the attention seems more focused on “concrete” adaptations, the ones which adorn brochures of someone doing something. Lacking is dedicated finance for supporting countries in identifying the most suitable adaptation option, through data collection, research and economic analysis. Photo-ops they are not. The impact, however, is priceless.

Change is required. UNDP has recognized the importance of ensuring that countries have and can rely on key foundational capacities to advance adaptation to climate change. In partnership with USAID and the Global Water Partnership, UNDP has been working to build the capacity of technical officers in developing countries to understand the economics of adaptation over the last 2 years.

Researchers from Thailand, Bangladesh, Sri Lanka and Mongolia have joined forces with economists from China, South Africa, Nigeria, Sri Lanka and the US, working together to understand the impacts of climate change on the agriculture sector. Researchers are receiving applied training on how to analyze household level survey data, collected from representative farms in their countries, to draw policy-relevant findings on the economics of adaptation. Their counterpart researchers in Cambodia, Viet Nam, Indonesia, Nepal, Lao PDR and Maldives are in the process of collecting country specific data, and will soon receive similar training.The exchanges between researchers and mentors from developing countries has been inspiring and is an advertisement for the power of collaboration between countries.

As encouraging as the results have been to-date, the reality is that we are only scratching the surface. The 20 researchers who are benefiting from this support must grow in numbers—within countries and across the region, and into other regions such as Africa. More applied research must be supported by the donor community. The capacities that are built up today, and the way in which those capacities are built up, need to be integrated into government institutions, so that the next generation of researchers and policy makers benefit and can build on the knowledge and insights generated by today’s champions.

Knowing how farmers are likely to adjust may not seem urgent to policy makers. After all, farmers will adapt whether government does anything to help them or not. But investigating adaptations that will not happen without policy makers is needed, and urgent.

Research on the economics of adaptation is integral. Without this knowledge base, countries will face constraints in making efficient and effective use of very limited financing.

Mariana Simões Pradeep Kurukulasuriya Climate change and disaster risk reduction Energy Environment Climate change Adaptation partnerships

UNDP Around the world