The Economics of Adaptation to Climate Change and Its Main Challenges

The economics of adaptation to climate change is a relatively new area of research that aims to contribute to the selection of efficient adaptations or to assess whether adaptation actions that are already being implemented are efficient or not. However, the economics of adaptation is also confronted with several challenges and some of them are analysed in this text. The first part of the text briefly describes the origins of climate change awareness in the scientific community and shows the recent (and very fast) progression of global adaptation planning. A basic definition of adaptation is given and related (and unrelated but, in this context, relevant) concepts are also mentioned. The basic criteria underlying the economics of adaptation to climate change are presented, as well as the main economic methods used to evaluate adaptation measures. The second part of the text analyses some of the most important challenges to the economics of adaptation to climate change, which have been divided into three main categories: (1) methodological challenges; (2) challenges posed by the interactions between adaptation and relevant variables; and (3) challenges that stem from cognitive biases and behavioural issues. An emphasis is given to cognitive bias and behavioural issues because the environmental challenges that the world is currently facing stem, to a large extend, from the fact that many didn’t see (and many still seem to not see) the urgent need to counteract (through adaptation or mitigation actions) the adverse effects of climate change.