An economic approach to adaptation: illustrations from Europe


Policy makers are still struggling to find a rational and effective way to handle adaptation to climate change. This paper discusses a more strategic, economic approach to public adaptation and compares it with adaptation practice in Europe. An economic approach to adaptation involves setting priorities, both spatially (where to adapt) and inter-temporally (when to adapt). The paper reviews what we know about Europe’s geographic adaptation priorities. On inter-temporal priorities, it recommends fast-tracking two types of action: Win-win measures that yield an immediate return, such as water efficiency, and strategic decisions on infrastructure and spatial planning that have long-term consequences for Europe’s vulnerability profile. An economic approach to adaptation involves careful project design to ensure adaptation measures are cost-effective and flexible in the light of climate uncertainty (how to adapt). The final element of an economic approach to adaptation is the division of labour between the state and private actors (who should adapt). The paper argues that the traditional functions of the state—the provision of public goods, creation of an enabling environment and protection of the vulnerable—also apply to adaptation.

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  1. 1.

    Another strand of literature deals with the economic cost (damage) of climate change more broadly (e.g. Tol 2008). Adaptation costs are one main component of total climate damages. The other main component is residual damage that cannot be avoided.

  2. 2.

    Note that in its recent report on extreme events the IPCC uses a different definition of vulnerability (Field et al. 2012). A disproportionate amount has been written about the right definition for concepts like risk, exposure, vulnerability and sensitivity. For practical purposes clear definitions are generally all that matters.

  3. 3.

    Some policy makers may want to separate out adaptations with a long lead time as a third category. Examples would be research into better climate information, new medicines or drought-resistant crop varieties. However, they can without risk of omission be included in the other categories.

  4. 4.


  5. 5.

    For a US example, the response to hurricane Katrina, see Sobel and Leeson (2006).


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An earlier version of this paper was commissioned from Vivid Economics by the European Investment Bank. We are grateful to Sebastian Catovsky, Jonathan Colmer, Susannah Fisher, Atanas Kolev, Nicola Ranger, Armin Riess, David Stainforth and Swejna Surminski. Fankhauser also acknowledges financial support by the Grantham Foundation for the Protection of the Environment, the UK Economic and Social Research Council (ESRC) and Munich Re.

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Correspondence to Samuel Fankhauser.

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Fankhauser, S., Soare, R. An economic approach to adaptation: illustrations from Europe. Climatic Change 118, 367–379 (2013).

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  • Public Good
  • Heat Wave
  • Adaptive Capacity
  • Adaptation Measure
  • Extreme Weather Event