Current climate variability already leads to high economic costs in Europe, including from major floods. Climate change is likely to increase these extremes, even in the short‐medium term. As these will be amongst the highest near‐term economic costs, managing these risks is an early priority for adaptation.
A major priority is to include adaptation into economic project appraisal of large infrastructure investments, because of the long life‐times and high exposure to future climate change. This includes existing planned investment (risk screening), but also new future investment specifically designed to respond to climate change, recognising the need to consider uncertainty for both.
The mainstreaming of adaptation in policy appraisal ‐ especially where there are large flows associated with including adaptation in major EU funding areas ‐ requires additional elements to current impact assessment, including the need to address scale and time preference issues.
The primary focus of adaptation economics to date has been bottom-up in nature, working at the sector level. However, it is increasingly clear that climate change – and adaptation to it – could have widespread macro-economic consequences with possible implications for public finances, and that investment in adaptation could affect growth and competitiveness.
