What You Need to Know About How CCDRs Assess Adaptation Needs

Why should CCDRs include adaptation at all? Shouldn't the emphasis be on how countries can reduce emissions?

Climate change adaptation is a development imperative: without policy measures and investments to reduce climate change impacts, countries will not be able to meet their development goals. Our studies show that climate change will have a negative economic effect and increase the number of households living in extreme poverty. Adaptation, however, can lessen these economic and poverty impacts significantly. The number of people falling into poverty by 2030 because of climate change is estimated to range from 32 million and 132 million. This wide range is driven by assumptions regarding the speed of development. The optimistic baseline scenarios assume rapid and inclusive growth, with universal access to basic services in 2030, and a healthier, well-educated population with access to less-climate-vulnerable jobs. Such progress would halve the poverty impacts of climate change compared with the pessimistic baselines in which the pace of development is slower.

So, development can help reduce climate change impacts, but only if development investments made today are themselves resilient. Our CCDRs aim to help countries account for climate impacts in their economic and development decision-making so they can incorporate targeted adaptation measures in their planning, policies, and investments. For example, infrastructure such as roads, buildings, power plants, water supply and treatment plants should be designed and built to be resilient to a range of future climate conditions over their lifetimes. This is why CCDRs not only focus on evaluating options to reduce emissions in countries but also look at climate adaptation in the context of development.

What have CCDRs revealed so far about adaptation needs in countries? Who is most at risk and why?

All the countries we looked at in our first set of 25 CCDRs have been shown to be vulnerable to climate change, but they face different risks and levels of vulnerability depending on their geography and underlying socio-economic conditions. The economywide costs of climate impacts were particularly high for poorer countries least able to bear these costs. Within countries, poor and marginalized communities are most at risk because they have less ability to adapt or to respond to shocks. They are often located in vulnerable areas – for example, the urban poor may live in a flood zone because of limited resources and opportunities.

These differential impacts across countries, in turn, suggest different priorities for adaptation. Lower income countries, for instance, will not only need financial resources for adaptation investments but also to build capacity and strengthen institutions to implement adaptation measures. In higher income countries where institutional structures are more developed, it may be more pressing to mainstream climate policies in macro-level planning decisions and infrastructure investment. But all countries have gaps and need to do more for adaptation.

How do you determine adaptation needs?

The first thing is to understand how climate change will impact the development trajectory of the country. The very process of development changes the nature of the risk and can help countries to become more resilient to the impacts of climate change. As countries develop, the structure of their economy shifts away from agriculture, which tends to be one of the most vulnerable sectors to climate change, towards industry and services, which are often less vulnerable to climate impacts. As countries get richer, they can also build better, less vulnerable infrastructure, and their risk of climate impacts goes down.

But even with strong development and poverty reduction, countries will need to do different things and they will need to do things differently to really build resilience. For example, they will need to locate new neighborhoods and infrastructure in areas that are less vulnerable to climate change impacts such as flooding and sea level rise, otherwise development gains will not be sustained.

To assess adaptation needs, we project what the country would look like in 2030, 2040, and 2050, if it were to accelerate development and implement its development plans. We then estimate the impact of climate change on the country along its development path to understand how development plans need to be adjusted to strengthen resilience.  We also use “damage shocks” from climate change to specific sectors to quantify these impacts: for example, how changes in temperature or precipitation will affect labor productivity at the economy-wide level. These estimates are fed into economic models to estimate impacts on GDP.  Finally, we look to identify the additional measures and investments --- namely, adaptation needs -- that would enable the country to meet its development goals in the face of climate change.  

In the case of Malawi, we found that a business-as-usual approach – that is, without rapid development or investing in adaptation  – would result in GDP losses as high as 9% by 2030. On the other hand, with accelerated development and additional adaptation measures, the impact of climate change on GDP would be much less - ranging from -1 to 3%. This finding illustrates that development is critical to build resilience in Malawi, but that development will require both doing different things and doing things differently.

A similar analysis is being done in the Caribbean, where adaptation is a key part of the CCDR. We started from the development vision of these countries for 2050, and then looked at how to make their development trajectory resilient to future climate impacts. In the analysis, we focus on infrastructure sectors because those are what gets damaged a lot by extreme events such as hurricanes, sea level rise, and water scarcity. We also focus on coastal areas critical for tourism. We are working with governments to propose different adaptation scenarios for infrastructure and coastal protection, estimate the costs, integrate protection into macroeconomic models, and translate this into practical thinking about financing.

The financing challenge is particularly significant for adaptation. Building from the adaptation analysis in the CCDR, what comes next? What is the potential for CCDRs to drive finance and innovation for adaptation?

The World Bank is a key source of climate finance for adaptation, and CCDRs can identify high impact, low-cost measures to inform the Bank’s own investment pipelines. CCDRs may also guide countries’ finance strategies and provide a foundation to design results-based financial instruments and incentives to mobilize finance for adaptation. Adaptation and resilience diagnostics in CCDRs help to identify market failures, gaps in information, institutions and policies and measures needed to create a supportive policy environment for financing adaptation. However, unlike mitigation, capturing avoided climate damages in benefit cost analysis to develop bankable projects and attract private capital remains a challenge. The CCDRs are a good start to make the financial case for adaptation investments, but more needs to be done to link analytical results with innovative financing design.

There is also a sweet spot between adaptation and mitigation that may help countries eventually generate adaptation finance. With climate change, the value of ecosystems (such as mangroves and wetlands) will continue to increase. Restoring land, forests, and other natural areas would not only build resilience but also store carbon, enabling countries to earn carbon credits and access carbon markets. These markets are still evolving, but as they mature, they could become a source of finance for countries.

What do you see as the game-changer for adaptation?

There is no one silver bullet: a lot of things need to happen in a lot of different sectors to support adaptation. But in its own way, the CCDR itself can be the game changer: its holistic view makes adaptation everyone's responsibility and shows that you must infuse development with climate considerations to successfully adapt. And the CCDR also can help countries build adaptation into sectors such as water and agriculture, as well as climate-adaptive financial sectors and infrastructure. By estimating the costs of adaptation, CCDRs also show that there are adaptation investments that can bring high economic returns -- that is one kind of game changer. At their core, these investments are about people and communities and about protecting the most vulnerable – so the CCDRs are also human capital game changers.