Adapt­ing to cli­mate change – three suc­cess sto­ries

In 2006, the Ethiopian gov­ern­ment and in­ter­na­tional part­ners es­tab­lished the Pro­duc­tive Safety Net Pro­gram. The pro­gramme pro­vides cash and food to fam­i­lies that are un­able to feed them­selves due to droughts, de­layed rains, and flood­ing that threaten food

Financial Nigeria Magazine - - Contents - Ev­ge­nia Pu­gacheva is a Re­search As­sis­tant in the World Eco­nomic Stud­ies Divi­sion of the IMF's Re­search Depart­ment. Mico Mrkaic is a se­nior econ­o­mist in the IMF’s Re­search Depart­ment. Source: IMFBlog

Cli­mate change is one of the great­est threats fac­ing our planet. Its neg­a­tive ef­fects on health, the bio­sphere, and labour pro­duc­tiv­ity are al­ready be­ing felt through­out the world. Aware of the dan­ger, com­mu­ni­ties, house­holds, and gov­ern­ments have started tak­ing mea­sures to re­duce their ex­po­sures and vul­ner­a­bil­ity to weather shocks and cli­mate change. Our study in the World Eco­nomic Out­look shows that pub­lic in­vest­ment in adap­ta­tion can par­tially re­duce the eco­nomic costs of se­vere weather events.

Gov­ern­ment in­volve­ment is key

In our pre­vi­ous blog, we used his­tor­i­cal ev­i­dence to show how a 1°C in­crease in tem­per­a­ture in a coun­try with an av­er­age an­nual tem­per­a­ture of 25°C, such as Bangladesh, Haiti, and Gabon, would re­duce per capita out­put by 1.5 per­cent – a loss that per­sists for at least 7 years. What would the ben­e­fits be if gov­ern­ments pro­vided in­cen­tives for in­vest­ing in adap­ta­tion to cli­mate change? Our model sim­u­la­tions sug­gest that the ben­e­fits can be sig­nif­i­cant.

House­holds and firms al­ready in­vest in adap­ta­tion to re­duce the im­pact of chang­ing weather con­di­tions – for ex­am­ple, by plant­ing more heat-re­sis­tant crops or in­vest­ing in green in­fra­struc­ture. But the ben­e­fits of many adap­ta­tion mea­sures do not ac­crue solely to those who make the

in­vest­ment. For ex­am­ple, an early-warn­ing sys­tem for ex­treme weather will be en­joyed freely by ev­ery­one liv­ing in the area.

Be­cause house­holds and firms do not take into ac­count the full so­cial ben­e­fits of these in­vest­ments, gov­ern­ments will need to step in. Us­ing a dy­namic gen­eral equi­lib­rium model, we show that if gov­ern­ments sub­si­dize pri­vate in­vest­ment in adap­ta­tion, the eco­nomic bur­den of weather shocks could be par­tially re­duced. More­over, due to the smaller dam­age to out­put, the re­duced losses from weather shocks as a re­sult of in­vest­ing in adap­ta­tion mea­sures could sig­nif­i­cantly ex­ceed the cost to the pub­lic cof­fers over time.

Our model sim­u­la­tion il­lus­trates a gen­eral prin­ci­ple that gov­ern­ments should sup­port adap­ta­tion to im­prove re­silience and re­duce the im­pact of weather-re­lated shocks. Many gov­ern­ments have al­ready started im­ple­ment­ing strate­gies to bol­ster cli­mate change adap­ta­tion. And there have been suc­cesses.

So­cial safety nets in Ethiopia

In 2006, the Ethiopian gov­ern­ment and in­ter­na­tional part­ners es­tab­lished the Pro­duc­tive Safety Net Pro­gram. The pro­gramme pro­vides cash and food to fam­i­lies that are un­able to feed them­selves due to droughts, de­layed rains, and flood­ing that threaten food se­cu­rity. The aid is con­tin­gent on par­tic­i­pa­tion in lo­cal pro­duc­tiv­ity-en­hanc­ing or en­vi­ron­men­tal pro­grammes – for ex­am­ple, land re­ha­bil­i­ta­tion, im­prove­ment of wa­ter sources, and con­struc­tion of in­fra­struc­ture such as roads and hospi­tals.

Pro­gramme ben­e­fi­cia­ries ex­pe­ri­ence a 25 per­cent smaller drop in con­sump­tion af­ter droughts rel­a­tive to those not in the pro­gramme. The pro­gramme has also re­duced soil loss by more than 40 per­cent, im­proved avail­abil­ity of wa­ter, and in­creased land pro­duc­tiv­ity.

Cli­mate-smart in­fra­struc­ture in Malaysia

The Stormwa­ter Man­age­ment and Road Tun­nel (SMART Tun­nel) in Kuala Lumpur, Malaysia, serves a dual pur­pose: it car­ries traf­fic and helps com­bat flash floods. The tun­nel con­sists of three lev­els. Nor­mally, the top two lev­els carry road traf­fic. How­ever, they can be tem­po­rar­ily used as storm drains. At a cost of about $500 mil­lion, the SMART Tun­nel is ex­pected to pre­vent more than $1.5 bil­lion in flood dam­age and re­duce the costs of traf­fic con­ges­tion by more than $1 bil­lion over the next 30 years.

Cen­tral­ized air con­di­tion­ing in In­dia

High tem­per­a­tures re­duce labour pro­duc­tiv­ity and can also harm health. Air­con­di­tion­ing is the most com­mon so­lu­tion to deal with ex­ces­sive heat. How­ever, the neg­a­tive ef­fects of air-con­di­tion­ing, such as in­creased en­ergy con­sump­tion and pol­lu­tion, can­not be ig­nored. More­over, high up-front costs and in­fra­struc­ture re­quire­ments push air con­di­tion­ing out of reach for poor and vul­ner­a­ble pop­u­la­tions, es­pe­cially in low-in­come coun­tries.

Dis­trict cool­ing, a cen­tral­ized air­con­di­tion­ing sys­tem where cen­trally chilled wa­ter is dis­trib­uted to con­sumers through un­der­ground pipes, can re­duce these neg­a­tive ef­fects. It is in use in sev­eral ma­jor cities in ad­vanced economies and is cur­rently un­der con­struc­tion by the Gov­ern­ment of Gu­jarat, In­dia, in the Gu­jarat In­ter­na­tional Fi­nance Tec-City. Cen­tral­ized cool­ing sys­tems re­duce cost and pol­lu­tion by con­sum­ing 35 to 50 per­cent less en­ergy than in­di­vid­ual air cool­ing units. These sys­tems un­bur­den the elec­tric­ity sec­tor and make in­door cli­mate con­trol more ac­ces­si­ble by elim­i­nat­ing the up-front cost for its users.

Avert­ing the cri­sis

Cli­mate change adap­ta­tion can lessen the eco­nomic costs of cli­mate change, as il­lus­trated by our model sim­u­la­tion and var­i­ous ex­am­ples around the world. But in­vest­ing in suc­cess­ful adap­ta­tion strate­gies is ex­pen­sive. It will fur­ther stretch the bud­gets of al­ready very poor coun­tries, where the ad­verse ef­fects of cli­mate change are most pro­nounced.

Hence, it is im­per­a­tive that the in­ter­na­tional com­mu­nity, par­tic­u­larly the ad­vanced economies, which have emit­ted the lion’s share of green­house gasses, help fi­nance adap­ta­tion re­lated projects in poorer coun­tries.

That said, adap­ta­tion alone is not enough. The only long-term so­lu­tion for the cli­mate change cri­sis is to sharply re­duce the green­house gas emis­sions re­spon­si­ble for Earth’s warm­ing.

It is im­per­a­tive that the in­ter­na­tional com­mu­nity, par­tic­u­larly the ad­vanced economies, which have emit­ted the lion’s share of green­house gasses, help fi­nance adap­ta­tion re­lated projects in poorer coun­tries.

Pic­ture on im­pact of Ethiopia’s Pro­duc­tive Safety Net Pro­gramme on the nu­tri­tional sta­tus of chil­dren

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