Total Costs and Budgetary Effects of Adaptation to Climate Change: An Assessment for the European Union

Adaptation to climate change is gaining increasing relevance in the public debate of climate policy. Thus, knowledge of costs and benefits of adaptation measures is of high importance. This study compiles existing cost estimates for adaptation measures in Europe. The systematic approach of the literature review points out sectoral and regional knowledge gaps in the adaptation research as well as high uncertainties. In particular, adaptation costs for the transport and human health sectors are scarce, although high adaptation costs can be expected in these impact sectors in the next decades. Based on the literature review of adaptation costs, the study furthermore asks how and to which extent public budgets are affected by adaptation – an issue which has been broadly unexplored by existing literature to date. At first, we analyse qualitatively by which channels adaptation influences the public budgets. In the next step, we present theory-, literature- and data-based guesses for the public shares of total adaptation costs in each of the most affected economic sectors. Linking these shares with the literature-based cost estimates allows a first insight into the magnitude of future public adaptation expenses by sector. The results are reflecting the high uncertainties and large knowledge gaps inherent in economic impact analyses of climate change issues. However, some conclusions can be drawn: High public costs may mainly be expected in flood protection and the transport sector. The annual costs for adaptation to climate change may amount to up to 4 bn € in the 2060s, and 5.7 bn € in 2050, respectively. In the agriculture sector higher total adaptation costs may occur, albeit paid by the public purse only to a minor degree. On the contrary, negative adaptation costs (i.e. saved expenses due to adaptation) are also expected, particularly through less heating demand. These savings of expenses can reach the notable amount of 4.2 bn € in 2050, although with a high regional heterogeneity within Europe. A synopsis of the findings reveals the need for further research in the quantification of adaptation costs and benefits as well as the high relevance of climate change adaptation for future public budgets in Europe.

Osberghaus, Daniel and Christiane Reif (2010), Total Costs and Budgetary Effects of Adaptation to Climate Change: An Assessment for the European Union, ZEW Discussion Paper No. 10-046, Mannheim.