Climate impacts and adaptation to climate change in LICs

Jon Strand

Litterature references used in the lecture:

World Bank 2014 (on literature list)

Strand (note on adaptation and mitigation, on course website)

What is climate change, how will it develop, and how does it affect humans?

• Climate change is something that primarily results from the accumulation of greenhouse gases in the atmosphere. The concentration of GHGs has increased from about 280 ppm around 1700, to more than 400 ppm today.

• Climate change can also result from natural phenomena, such as fluctuations in the sun’s activity, or geological phenomena (such as major volcano eruptions).

• Climate change takes the form of increases in global temperatures, changes in precipitation patterns, rising sea levels, and increases in the frequency of extreme meteorological events.

Average global surface temperature increase up to 2100

How serious are the impacts of climate change?

• Generally, temperature increases are expected to be greater the farther you are from the Equator, and smaller very close to the Equator.

• But the countries close to the Equator are today typically too hot, and getting hotter can be very damaging to them.

• Most poor people in the world live close to the Equator. For these, climate change can be very damaging.

• Richer societies are found mostly in less warm (temperate and cool) areas. For these, some warming may not be so bad, or it may even be good (as, for example, for agriculture in Canada and Russia and even Norway).

Frequency of extreme events: Recent history

Frequency of temperature anomalies over the period 1951-1980 (left panel); predicted for 2070-2100 (right panel)

Occurrence of days under drought conditions expected by 2070-2100, relative to 1980-2000

Median yield changes for major crops, by 2070-2100 relative to today

The previous slide dramatically illustrates difference between tropical and non-tropical countries

• Grain yields are bound to increase in colder areas, but be seriously reduced in areas that are already warm. This incudes basically all poor countries.

• Loss of tropical forests can also seriously reduce crop yields in the same regions, as there will be less rainfall when forest is lost.

• Two factors could counteract and reduce these losses:

• 1. The carbon fertilization effect: when global warming is due to more carbon in the air, a countervailing effect is that more carbon also increases plant growth (“carbon fertilization”).

• 2. Adaptation of crops: Some crops are more resistant to higher temperatures than others. It may be efficient to switch to these crops when temperatures rise.

Figure 4. Impacts from global warming are expected to be larger and more uncertain in poorer countries

Dispersion of long-run impacts across countries of a 2.0-2.5°C increase in temperature above its pre-industrial level

Source : Nordhaus and Boyer (2000), Mendelsohn et al. (2000) and first generation estimates reviewed in IPCC (1995).

Note : Estimates by Mendelsohn and Nordhaus and Boyer represent the annual GDP impact (relative to a no-climate-change scenario)

observed at the time when a +2.5° increase in temperature is reached (i.e. in 2100 in both exercises). They are not entirely comparable to

first-generation estimates, which are static estimates representing the annual GDP impact of a +2.5°C rise in temperature based on current

(1990) economic structures. The figure should be read as follows: For example, for Africa, the impacts of a warming of 2-2.5°C is expected to

fall within the range of -1% to -9% of GDP according to existing estimates, with an average value of about -4% of GDP.

Africa

South and Southeast Asia

China

Middle East

Latin America

Eastern Europe and former USSR

OECD Europe

OECD Pacific

North America

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

0 5000 10000 15000 20000 25000 30000 35000 40000 45000

Re

gio

nal

im

pac

ts a

s a

per

cen

tage

of

GD

P

GDP per capita in 2005, PPP US$

Ocean acidification trends up to 2100

Predicted sea level rise (minimum values)

Adaptation to climate change

• Adaptation means that for parties affected by climate change, their behavior is affected in ways that reduce or minimize the damages from climate change.

• Since adaptation action generally benefits (only) the party taking action, such action will typically tend to be optimal. (This in particular applies to short-run adapation; we will below consider differences between short-run and long-run adaptation.)

• This is very different from mitigation action, which generally does not benefit the party taking action but others, and at other times. This is what makes implementing efficient mitigation action so difficult.

• Generally speaking, adaptation is something very natural and occurs everywhere and at every time. (A trivial example is, when we expect it to rain, we “adapt” by bringing an umbrella.)

Adaptation can take different forms

• Short-run versus long-run adaptation. The most “trivial” adaptation is short-run. But often long-run adaptation is required, and can have much greater impacts.

• Efficient long-run adaptation is more difficult to handle, because of capital and insurance market problems, and bias in forward planning. (For example, there may be too much real estate being built on the Florida coast, resulting in excessive hurricane damages.)

• Adaptation (when done optimally) can require long planning, and involve both the public and private sectors, and several countries. Examples are dikes and flood-protection barriers (large, long-lasting public) and international warning systems (multi-country).

Many ways to adapt (long-run):

• Build shields to protect buildings in storm-exposed areas

• Move major economic activity from vulnerable to less vulnerable zones (away from low-lying areas, and from areas prone to hurricanes and tornadoes)

• Shift crops in agriculture, in response to changes in temperatures and rainfall

• Development as adaptation: It may be argued that the development process itself, with a diminishing role of agriculture in economic output, implies adaptation to climate change.

Adaptation in agriculture: How optimal crop choice depends on mean annual temperatures

Adaptation and mitigation: Some analytics

• Consider welfare W as a function W(T(M), L, A), of temperature T (in turn a function of mitigation M), and two types of adaptation activity, L and A. A is all current (short-run) adaptation activity, as an immediate response to a given climate. L is “anticipatory” or “long-run” adaptation. Net welfare can be written as

• In the short run we are likely to have

( ( ), , )V W T M L A M L A

( , , ) ( , , ) ( , , )0, 0, 0.A t t t L t t t A t t t

t t t

dW T L A dW T L A dW T L A

dT dT dL

Mitigation and adaptation (cont.)

• We can also find the welfare loss due to climate change given that we adapt:

• Both main elements on the right-hand side are here likely positive.

• Subscript 2 represents situation after climate change. This relatioshipsplits the overall welfare loss from climate change, into a term representing “residual damage”, and a term representing increased adaptation costs (here, only short-run costs).

1 1 1 1 2 1 2 2 1 1 1 2 1 2 2 1( , , ) ( ( , , ) ) ( , , ) ( , , ) ( )t t t t t t t t t t t t t t t tW T L A A W T L A A W T L A W T L A A A

Optimal mitigation and adaptation

• Express welfare with a time dimension:

• We can now at least conceptually optimize wrt both short-run adaptation A, long-run adaptation L, and mitigation M. This gives three first-order conditions on the next slide.

1 1 1 1

( , , , , ) ( ( ), , )

[ [ ( , , , , , , )]

t t t t t t t t t t t t t

t t t t t t t t

V M M L L A W T M L A M L A

E V M M M L L L A

Optimal mitigation and adaptation (cont.)

• First-order conditions with respect to A, L and M can be written as:

11 0t t

t t

dV dVE

dM dM

11 0t t

t t

dV dVE

dL dL

( ( ), , ) 1 0tAt t t t

t

dVW T M L A

dA

Given a horizon τ+t starting at t, the two first of thesefoc’s can be given the following simpler formulations:

• Often (or typically) mitigation will be suboptimal (too little). Then we can study relationships between mitigation and adaptation as follows

• dL/dM is negative when M and L are “broadly substitutes”, as this implies WLM < 0 (we have WLL < 0).

1 0tt t

t

t t

dV dWE

dM dM

1 0tt tt

t t

dV dWE

dL dL

Adaptation with sub-optimal mitigation

• As for At, this cannot be affected by Mt (nor by Mt+τ for τ > 0) but rather by Mt-k for k > 0.

• This expression is negative: More past long-run adaptation reducesthe need for short-run adaptation later.

• A presumption here is that actual (non-optimal) mitigation is not affected by adaptation, which may be unrealistic.

( ( , ), ( , ), ( , ))

( ( , ), ( , ), ( , ))

t AM

t k AA

dA W M t t k L t t k A t t k

dM W M t t k L t t k A t t k