Workshop: “Adaptation to Climate Change in Mountain and Coastal Ares: A Transatlantic Dialogue” Climate Service Centre Hamburg April 16-19,2013

Economics of Climate Change Adaptation

Bernd Hansjürgens

Structure

1. Framework, definitions and entry- points for economics

2. Economic valuation – CBA, CEA and MCA how can stakeholders be involved ?

3. Case Study: Economic valuation of climate change impacts in the Elbe region

1. Framework, definitions and entry points for economics

Regional Scenarios of Global Climate and Societal Change

Climate Change Impact Analysis and Vulnerability Analysis

Development, Evaluation and Prioritisation of Strategies and Measures

Implementation of Regional Climate Adaptation Plans

The typical “chain”

of climate change adaptation analysis

GLOBAL REGIONALEmissions scenarios

Global climate model

Modelling: On the way to Adaptation

Flora und Fauna

Soil

Water

Regional Climate Impacts

Regional climate model

Vulnerability -

some definitions

Vulnerability: capacity to anticipate, cope with, resist or recover from the impact of a hazard.” (Wisner et al 2004)

Exposure: how individuals or groups in society are exposed to climate change impacts

Coping capacity: Access how groups and individuals to cope with, to mitigate and to adapt to shocks, stresses or critical trends

HazardsShocks Stresses Critical trends

Vulnerability Exposure Coping capacity

Vulnerability and climate change –

components

Who and what is effected ?

Regional Scenarios of Global Climate and Societal Change

Climate Change Impact Analysis and Vulnerability Analysis

Development, Evaluation and Prioritisation of Strategies and Measures

Implementation of Regional Climate Adaptation Plans

Where does economics come in?

2. Economic valuation:

CBA, CEA, MCA and stakeholder involvement

Cost-benefit-analysis Characterisation

• Evaluation of advantages (benefits) and disadvantages (costs) of a project or programme

• A mono-criteria approach: Costs and benefits are expressed in one „unit“ – in monetary terms

• But: CBA is more than monetization – a frame for decision making consisting of several steps

• Broad application in project managment, public policies,….

CBA Problems • Monetazation often difficult:

• Criticism on ethical reasons – Human life and ecosystems‘ health should

not assessed in monetary terms

• Criticism on methodological reasons – Many bnefits cannot

be assessed properly

• Criticism on political reasons – Dollar values lead to one-sided emphasis on business values in political decision making CBA should

not be applied

• Stakeholder-Involvement: Often conducted technokratic or not at all; not systemetically

Cost-effectiveness analysis (CEA) • Difference to CBA: There are different measures

and they all are (more or less) identical to reach a certain target

• Advantage: the difficulties of valuing benefits is overcome (environmental damages; ecosystem services etc.)

• Focus on different costs

of measures that achieve an identical goal (= „cost efectiveness“)

• But be aware: only „correct“ if benefits of measures are indeed identical

• Stakeholder involvement usually not forseen

Multi-criteria analysis (MCA)

Characterisation:•A multi-criteria approach: Advantages and disadvantages are expressed in different „units“, based on different criteria

•Broad application in decision theory; less application in practise (project managment, public planning…)

Problems:•Definition of criteria: what are the criteria taken into account? Who defines criteria? •Weighting of criteria: What are the weights? Who defines weights?

Multi-criteria-analysis –

Problems

• Stakeholder-Involvment: • Good possibilities; probably even reqired for such

processes • Definition of weights can be achieved in

accordance with stakeholders (e.g. stakeholder workshops)

3. Case study GLOWA Elbe:

Economic valuation of climate change impacts

in the Elbe region

1. Show the impacts of climate and socio-demographic change on water demand and water availability (~2050)

2. Identify conflicts3. Design and assess adaptation strategies

Objectives of the project GLOWA Elbe

1. Scenario-based approach:

Two scenarios (IPCC) are considered:A10: Globalisation: Increasing global convergence, low priority for environmental policy goals

B2+: Regionalisation: Persistance of regional differentiation, high priority for enviromental policy goals

2. Interdisciplinary, model-based approach

Approach

climate change

natural water supply

water availability

WBalMo

meteorology/hydrology

water quality

socio-economics

cost-effectiveness of adaptation options

nutrient load

algea load

MONERIS

QSim

SWIM

STAR

multicriteria assessment of adaptation options

economic losses due to water scarcity PRIMATE

demographic & economic development

households, industry, power plants

REGEwater demand

KIWA KASIMINUWIM

land-useagricultureLUSRAUMIS

Stakeholder involvement in the GLOWA Elbe Project –

Global change in the water sector

4 Valuation

1 Scenarios

2 Indicatos/Criteria

3 Impacts

Identification of conflicts and options

→ Interviews, workshops & informal

Stakeholder Involvement

Additional criteria →

informal

Knowledge base for valuation functions → interviews

Involvement in MCA (e.g. weighting of criteria) → Workshop

Verification and adaptation of GLOWA Elbe results → Workshop

A) Assessment of economic losses due to water scarcity

B) Choice and assessment of adaptation options

Economic Analysis in GLOWA Elbe

Water users in the Elbe River basin

Layout: Jana Borgwardt, TUBerlin ±0 40 80 120 16020Kilometers

Surface water abstractions (unspecified)m³ / d

Actual surface water abstractionsm³ / d

Approved surface water abstractionsm³ / d

0 - 10.000

10.000 - 100.000

100.000 - 1.000.000

1.000.000 - 10.000.000

0 - 10.000

10.000 - 100.000

100.000 - 1.000.000

0 - 10.000

10.000 - 100.000

100.000 - 1.000.000

1.000.000 - 10.000.000

catchmentRivernet

477 significant surface water withdrawals (> 50 l /sec)

Water users under investigation:

• Power plants• Hydropower plants• Agricultural irrigation• Recreation (boating and mining lakes)• Wetlands• Industry• Drinking water supply• Pond fisheries

Vulnerability is measured with a probabilistic concept of expected annual loss:

Economic loss is analysed with respect to:• Water user groups• Time (2008-2052)

The evaluation approach

Expected loss in period t

Realisation with occurrence probability and loss

ii

it LPEL

realisation period loss/a

yzx

L

yzxL

Loss functions integrated in WBalMo

Recreation-

boating (wetlands and

rivers)

Hydropower plants

Energy production (large power plants)

Agricultural irrigation

Water supply companies

Inland waterway transportation

Wetlands (CO2, habitat, agriculture)

Industry

Pond fisheries

Recreation at mining

lakes

Downstream Users

Upstream UsersUpstream Users

WBalMo: simultaneous simulation of water availability and economic effects

yzxL

yzxL

yzxL

yzxLy

zxL

yzxL

yzxL

yzxL

yzxL

yzx

L

yzxL

User groups with loss functions integrated in WBalMo

Recreation-

boating (wetlands and

rivers)

Hydropower plants

Energy production (large power plants)

Agricultural irrigation

Water supply companies

Inland waterway transportation

Wetlands (CO2, habitat, agriculture)

Industry

Pond fisheries

Recreation at mining

lakes

Downstream Users

Upstream UsersUpstream Users

yzxL

yzxL

yzxL

yzxLy

zxL

yzxL

yzxL

yzxL

yzxL

Reduced water availability/higher water temperature Reduced production capacityReduced profit

)(**)(_ )()(),,()(),( dsttmdsdsm

tds CvPhKWnKWKWV

Results

Source: Grossmann et al. 2009

Basis: STAR A1B, S2

Expected annual loss among water users

Result 1: Wetlands, hydro power, agricultural irrigation and power plants are most strongly affected by water scarcity.

Change in loss between period 2008-2012 and period 2048-2052

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

Wetlands

Industr

yHyd

ro po

werPon

d fish

eries

Irriga

tion

Waterwork

sPow

er pla

nts

Boatin

g

Cha

nge

in a

vera

ge a

nnua

l los

s (€

)A1o BasisB2+ Basis

Expected annual loss among water usersChange in loss between period 2008-2012 and period 2048-2052

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

Wetlands

Industr

yHyd

ro po

werPon

d fish

eries

Irriga

tion

Waterwork

sPow

er pla

nts

Boatin

g

Cha

nge

in a

vera

ge a

nnua

l los

s (m

illio

n €)

A1o BasisB2+ Basis

Result 2: …users, whose water demand increases with increasing evapotranspiration.

Result 3:…users that depend on discharge.

These water users have hardly any adaptation capacity.

Source: Grossmann et al. 2009

Basis: STAR A1B, S2

Source: Grossmann et al. 2009

Basis: STAR A1B, S2

Expected annual loss among water usersChange in loss between period 2008-2012 and period 2048-2052

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

Wetlands

Industr

yHyd

ro po

werPon

d fish

eries

Irriga

tion

Waterwork

sPow

er pla

nts

Boatin

g

Cha

nge

in a

vera

ge a

nnua

l los

s (€

)

A1o BasisB2+ Basis

Result 4: Users demanding large quantities of water are less affected –

if they use technological adaptation options…

Expected loss for each individual user in periods 2008-2012 and 2048-2052

Expected loss per individual water user

Result 5: • More than 50% of users face no loss.• Less than 20% of users represent most of the overall loss. • Exception: Among hydro power plants and wetlands all users will face loss.

Industry Agricultural Irrigation Pond fisheries

Expe

cted

loss

[EU

R]

Expe

cted

loss

[EU

R]

Expe

cted

loss

[EU

R]

• We do not expect basin-wide water scarcity problems

• But: some user groups or individual users will be strongly affected

• In particular water users that are already affected today will face an increase in loss in future

What does this mean for the management of water resources?

Focus on current problems

Adaptation options?

Conclusion regarding vulnerability

Choice and assessment of adaptation options

Objective:• Identify adaptation options• Assessment and comparison

(under uncertainty)

(Further) development of an assessment tool:

PRIMATE

(Martin Drechsler, Martin Lange, Volker Meyer) supporting stakeholders

in the choice and assessment process

Adaptation strategies

choice of adaptation strategies

choice and weighting of evaluation criteria

Stakeholder involvement in PRIMATE

Stakeholder involvement in PRIMATE

choice of adaptation strategies

Based on stakeholder workshop, bilateral communication

Fields of adaptation:

reservoir management

water transition

wetland management

demand management

Choice of adaptation strategies

• Reservoir management in CZ

• Polder in Germany

• Elbe → Spree, Schwarze Elster

• Oder → Spree

• Oder → Oder-Spree-Channel

• Mittellandkanal

• Oder-Havel-Channel

• Extensivation: cropland to greenland

• Intensivation: greenland to cropland

• water logging in peatlands

Public water supply, industry,

power plants, agriculture:

• price

• technological options

• legal instruments

Stakeholder involvement in PRIMATE

choice and weighting of evaluation criteria

choice of adaptation strategies

1.

Selection of evaluation criteria

2.

Weighting of criteria … for different decisions makers/

interest groups

criteria:• monetary losses of different user

groups• agriculture

• industry

• power plants

• …

• relative fulfilment of demand of ecological discharge

• single gauges (-300) or subbasins

• flood risk: annual average damage (from VERIS-Elbe project)

• costs of adaptation

Evaluation criteria

1-n decision makers criteria weights

choice of adaptation strategies

Uncertainties in criteria values

choice and weighting of evaluation criteria

Uncertainties

Uncertainties: distribution function

Cost-benefit analysis

• only monetary criteria (costs, benefits)

• addition of discounted costs and benefits

net benefits(compared to the baseline option)

Two assessment approaches

Multicriteria analysis:PROMETHEE (Outranking-

approach)• pairwise comparison of

alternatives & criteria• counting of „votes“

for

(outflux) or against

(influx)

an alternative

„netflux “

(also for different decision makers)

assessment and ranking of options

Assessment

choice of adaptation strategies

uncertainties in criteria values

choice and weighting of evaluation criteria

for:• Cost-benefit

analysis• Multicriteria

analysis

Ranking (probability)

Thank you for your attention! 

Bernd Hansjürgens Malte Grossmann, Nele

Lienhoop, Volker Meyer, Martin Lange

Stefan Vögele, Konar

Mutafoglu, Hagen Koch, Ottfried Dietrich, Jacob Möhring, Michael Kaltofen, Martin Drechsler