Climate Adaptation

Abstract

In this review, we summarise the literature on weather and climate adaptation in developing countries. First, we document the effects of climate change and extreme events on economic outcomes. Climate change and weather shocks negatively impact households, firms, and countries across a range of important outcomes such as income and mortality. These effects are usually quite large, and can transmit across space via supply relationships or migration, and persist across time, including in some instances for decades. Next, we review the evidence on the effectiveness and efficiency of various adaptation approaches. We discuss adaptation through financial products, new technologies, mobility, and government policies. The literature indicates that while households, farmers, and firms undertake a variety of adaptation measures, these are seldom able to mitigate the impacts of climate completely, indicating that policies to facilitate adaptation will likely have large welfare gains. As developing countries begin to ramp up efforts to facilitate adaptation and receive international funding for climate change adaptation, understanding how these can be best allocated to high-impact regions and policies should form a crucial set of questions for future work.

Climate Adaptation: Summary

Developing countries face the joint challenges of reducing poverty and adapting to a changing climate, while in some cases also needing to reduce their greenhouse gas emissions. Currently, 60% of the world’s population lives in a place where a hotter year causes lower GDP growth, and by 2100, 75% will (Acevedo et al. 2017). Therefore, even if the ambitious global target of limiting warming to two or below degrees is reached, there will be a substantial need to allocate resources towards adaptation, and balance the need to increase resilience to climate change with economic growth.

Developing countries are most vulnerable to climate change for a range of reasons. These include a greater impact of temperature on output (Acevedo et al. 2017, Burke et al. 2015), long coastlines which increase vulnerability to certain extreme events (Balboni 2021), and lower incomes, which can impact resilience and the ability to undertake adaptive investments. Furthermore, on average, mean temperatures are higher in developing countries, implying that further warming may increase this vulnerability. Finally, developing countries have lower access to social safety nets, further increasing households’ vulnerability in the face of climate shocks (Hanna and Oliva 2016).

This review summarises the literature on climate adaptation in developing countries, focusing on three aspects in particular. The first is the literature on quantifying vulnerabilities to weather and climate, which focuses on the cost of weather and climate shocks on important economic outcomes, like  income, conflict, human capital formation, productivity, and mortality. The second is the literature on measuring adaptation by individual actions, such as technology adoption, migration and job-switching, as well as government policies including safety nets. The third summarises the recent literature on spatial linkages and general equilibrium approaches to climate change adaptation. The effects of climate shocks may be transmitted across regions via general equilibrium adjustments along a range of margins which have been investigated in recent empirical studies such as migration, or through production networks between firms. Accounting for these responses has been found to have quantitatively meaningful implications for estimates of climate change damages and our understanding of adaptation requirements and mechanisms.

There are four aspects of the literature that are noteworthy. First, climate change and weather shocks impact households, firms, and countries negatively across a range of first-order outcomes such as income, conflict, human capital formation, productivity, and mortality. Second, these effects are usually quite large and can transmit across space via supply relationships or migration, and persist across time, including in some instances for decades. Third, while households, farmers, and firms undertake a variety of adaptation measures, these are seldom able to mitigate the impacts of climate completely, indicating that policies to facilitate adaptation will likely have large welfare gains. Fourth, while socio-economic policies can provide safety nets and minimise frictions that catalyse adaptation, political economy concerns may also shift the focus away from climate resilience. As developing countries begin to ramp up efforts to facilitate adaptation and receive international climate financing for adaptation, understanding how these can be best allocated to high-impact regions and policies should form a crucial set of questions for future work.

Climate Adaptation: Presentation of key takeaways

For our launch event, Namrata Kala joined us to present the key takeaways from this VoxDevLit, highlighting policy relevant results from recent economic research on climate adaptation.

References

Acevedo, S, M Mrkaic, N Novta, M Poplawski-Ribeiro, E Pugacheva, and P Topalova (2017), "The Effects of Weather Shocks on Economic Activity: How Can Low-Income Countries Cope," World Economic Outlook.

Balboni, C (2021), “In Harm’s Way? Infrastructure Investments and the Persistence of Coastal Cities,” Working Paper.

Burke, M, S M Hsiang, and E Miguel (2015), "Climate and Conflict," Annu. Rev. Econ., 7(1): 577-617.

Hanna, R, and P Oliva (2016), "Implications of Climate Change for Children in Developing Countries," The Future of Children: 115-132.