1. Adaptation – State of the Art and Current Issues Gary Yohe John E. Andrus Professor of Economics Wesleyan University May 10, 2006

2. Reflections from the Third Assessment Report of the Intergovernmental Panel on Climate Change Climate related damages that can be avoided by mitigation are the benefits of that mitigation. Credible calculations of the benefits of mitigation must therefore recognize the potential that adaptation (autonomous and planned) could reduce damages and therefore the benefits of mitigation. Adaptation and mitigation are substitutes in cost-benefit approach, so the tendency is to look for win-win options. This is a very limiting perspective.

3. An Alternative Approach Think about the climate policy issues as one of risk management. In this context, adaptation and mitigation are complementary tools with which we can lower risk. Working in both arenas at the same time offers the chance of bringing more countries into the effort – i.e., alleviating a source of concern in the United States Senate and beyond.

4. Conceptual Support for Including Adaptation in the Mitigation Baseline The environmental economics literature – optimal intervention assumes efficient evasive activity (i.e., exercise available adaptations to reduce exposure or sensitivity to environmental risk). The finance literature – efficient returns include risk premia net of diversifiable risk, so they include the benefits of effective diversification (i.e., maximal adaptation to the uncertainty).

5. More from the TAR Adaptation may or may not reduce climate-induced damages significantly. –SLR examples from developed coastlines (the US developed coastline work of Yohe shows significant cost savings from adaptation; corroboration in subsequent global coverage by Nichols and friends). –SLR examples from low-lying islands (Atoll states work by Adger shows abandonment only option to SLR, but earlier significant stress from other sources). This brings to bear questions of how to frame the baseline and attribute cost.

6. Including Adaptation can be Critical It follows that adaptation cannot be ignored in any credible calculation of the benefit side of mitigation. But we are not sure where, when and how people may or may not implement an adaptation strategy and whether it will be effective. The question of what works where is thus an empirical one.

7. Fundamental Conclusions from Chapter 18 Current knowledge of adaptation and adaptive capacity is insufficient for reliable prediction of adaptations; it is also insufficient for rigorous evaluation of planned adaptation options, measures and policies of governments (pg 880 or WGII Report). Vulnerability is a function of exposure and sensitivity; and both can be influenced by adaptive capacity. Exposure, sensitivity, and adaptive capacity are all path dependent and site specific.

8. Recall the Determinants of (Generic) Adaptive Capacity Availability of adaptation options Access to resources Distribution of resources – equity & the scope of poverty Governance issues –Stock of human –Social capital –Decisionmakers abilities to process information and uncertainty Access to risk-spreading mechanisms Public perception of causality and responsibility These are THE sources of site specificity and path dependence.

9. Further Support for Looking at the Underlying Determinants The determinants of AC map well into Prerequisites for Prevention where a weakest link hypothesis applies [Yohe and Ebi (2004)]. The determinants of AC map well into the preconditions for market efficiency where a weakest link hypothesis is well accepted. Reviews of the economic literature on reform and development highlight the necessity of spanning a large subset of the determinants.

10. A Potentially Unsettling Observation –Asking for estimates of the economic value of mitigation so that we can add things up might be wrong question. –Gaining a better understanding of how, when and where adaptation may or may not work well would help facilitate the adaptation process. –Looking at the determinants of adaptive capacity could be the key, and tracing how they map into the prerequisites for sustainable development could help the IPCC offer insight into how to raise the status of climate in domestic policy deliberations.

11. Perspective from a Risk-based Approach: Making a Connection by Synthesizing Adaptation with Mitigation Thinking about both mitigation and adaptation as tools to reduce the risk of troublesome, intolerable, etc…. climate change can make them complements rather than substitutes. Mitigation is then a means of hedging against bad outcomes measured, net of adaptation, in terms of the likelihood of crossing critical thresholds. Adaptation is then a means by which systems can expand their coping ranges or delay their contraction.

12. An Artificial Illustration – The Baseline (17 Threshold Breaches)

13. Adding Adaptation Alone (10 Threshold Breaches)

14. Adding Mitigation Alone (12 Threshold Breaches)

15. Adding Mitigation with Adaptation (7 Threshold Breaches)

16. An Applied Example: Flooding along the Ganges and Brahmaputra Question: Effect of adaptation and mitigation on climate- induced changes in the likelihood of modest, moderate, and severe flooding. Calibrate a hydrologic model of river flow in the basin to COSMIC output (monthly rainfall in Nepal). Estimate a relationship between flow and the likelihood of various types of flooding (indexed on return time). Run COSMIC to produce representatives of non- implausible futures without mitigation or adaptation. Repeat with adaptation and mitigation along 450A, 550A, 650A and S550 emissions scenarios.

17. Not-Implausible Futures from the COSMIC Calibration

18. Transients for the Representative Futures

19. Scenario 5 (unregulated and four mitigation scenarios: 450A, 550A, 650A and S550)

20. Some Observations from Scenario 5 Timing matters – compare 550A with S550. The system can be overwhelmed by climate change even with some mitigation (650A).

21. Scenario 3 (unregulated and four mitigation scenarios: 450A, 550A, 650A and S550)

22. Some Observations from Scenario 3 Timing still matters. The system need not be overwhelmed by climate change even without any mitigation. But mitigation sets the stage for potentially more effective adaptation.

23. Diversity in Path Dependence and Site Specificity is an Impediment But it is Nothing New The sometimes the magic works problem is ubiquitous in the issues that Finance Ministries already worry about: –Trade and Equity –Trade and Growth –Economic Reform –Investing in Social and Human Capital for Productivity Growth The determinants of when trade, growth, and reform policies work are the same as the determinants of adaptive (and mitigative) capacity.

24. Opening The Doors – Options and Insights The precursors of sustained support for productivity growth match well with the determinants of adaptive capacity. The complexities of site specificity and path dependence mean what works is an empirical question. Recognizing the complementarity of adaptation and mitigation becomes an opportunity to offer, for example, climate insurance by enhancing adaptive capacity and underwriting specific adaptations for nations that sign onto mitigation programs.