In the United Kingdom there is a statutory requirement for the government to undertake an assessment of the risks to the UK of the current and predicted impact of climate change every five years.
The three rounds of this policy cycle to date provide valuable lessons on integrating economic analysis into national risk assessment and adaptation planning. The government also has a duty to publish a National Adaptation Program after the Climate Change Risk Assessment (CCRA), setting out how it will address the risks.
Key Messages
- The Third Climate Change Risk Assessment (CCRA3) focused on 61 risks and opportunities, assessing the potential magnitude of the risks as well as the urgency for adaptation.
- For CCRA3, to identify where adaptation action is most urgently needed to inform adaptation planning, a threestep approach was used: (1) What is the current and future level of risk/opportunity? (2) Is the risk/opportunity being managed, based on government commitments and other adaptation actions? (3) Are there benefits to further action in the next five years, over and above that already planned?
- Analysis of the economic costs of climate change used a hybrid approach. Bottom-up approaches individually assessed the 61 risks and opportunities using sector models, and expert elicitation to fill gaps. The top-down approach input sectoral impacts into a macroeconomic computable general equilibrium (CGE) model to assess the headline impacts on GDP.
- There is some uncertainty about the size of the impacts in the UK, but a robust finding is that these will be significant. The studies show that most of the physical changes from climate change over the next 20 years are already locked-in and can only be reduced by adaptation. The benefits to global mitigation are very high but will materialize later.
- To inform step (3) regarding benefits to further action, a bottom-up review of potential costs and benefits of adaptation for the 61 risks and opportunities was undertaken. Many but not all early adaptation investments were found to offer high value for money, with cost-benefit ratios typically between 2:1 and 10:1.
- Globally, many countries have assessed the costs of their national adaptation programs, but almost none have assessed the economic benefits of these plans. Many top-down and macroeconomic frameworks are unable to assess adaptation (or can only do so in a highly stylized way). Bottom-up analysis is more common, but faces challenges because adaptation responses are risk, location, context, and time specific, and compounded by the uncertainty associated with future climate change.
In England, the Third National Adaptation Programme (NAP3) sets out proposed action over the five years from 2023-2028 and includes 511 individual adaptation actions. An initial estimate of the potential costs to deliver NAP3 was £5-10 billion per year ( Watkiss, 2022). Work to refine the estimates of the costs and be nefits of implementing NAP3 is underway. As part of this, CGE models are being used to assess the implications of adaptation to key risks for GDP and the public finances. This can help assess whether adaptation can re duce the macroeconomic disruption of climate change cost-effectively and whe ther it has net benefits for the public finances.