Economic valuation of climate change adaptation in developing countries

Abstract

This paper reviews the literature on the economics of climate change adaptation in developing countries, and identifies three key points for consideration in future studies. One key point is that all development policy should be formulated using forecasts from climate science as a baseline. When this is not done, there is risk that a false status quo without climate change is seen as an implicit baseline. Another key point is that authors must be clearer about their behavioral assumptions: Many studies either (problematically) assume profit maximization on the side of farm households, or do not specify behavioral assumptions at all. A third important point is that the allocation of rights is crucial for the results; if households have a right to maintain their current livelihoods, the costs of climate change in developing countries are considerably greater than traditional willingness-to-pay studies would indicate. Thus, costs and benefits of climate change adaptation cannot be analyzed using economic aspects only; climate science, behavioral science, and legal and moral aspects have crucial implications for the outcome of the analysis.