This document discusses challenges in conducting economic analysis of adaptation projects and proposes approaches to improve the analysis. It outlines traditional cost-benefit analysis but notes uncertainties make results limited. Alternatives like multi-criteria analysis are proposed. The document emphasizes stress-testing projects against multiple climate scenarios and selecting robust alternatives to deal with uncertainty in adaptation evaluation.

1. Are you brave enough? Economic analysis of adaptation to climate change on an agricultural project Gretel Gambarelli IUCN (formerly World Bank) Co-author: Mike Toman World Bank IFAD, 16 March 2011

4. Source: Adapted from IPCC 2007. What do we have to prepare for? Unsuccessful mitigation Unavoidable warming Successful mitigation

5. Adapting to climate change: the example of agriculture Adaptation classification Examples Autonomous / private Sectoral Change crops, crop calendars, irrigation schedules Economy-wide Market adjustments in crop prices reflect new production levels / scarcity Planned / public Hard “ Climate proof” infrastructure: irrigation systems, rural roads, … Soft Seasonal climate forecasts, capacity building, research and extension on drought resistant crops, local institutions, economic incentives for efficient water use

13. Step 1: Evaluating the costs of CC on agriculture ( 3/3 ) Alternative 3: Probabilistic methods May be applied to impacts of extreme events, but a better grasp on probabilities is a pre-condition Without adaptation With adaptation Loss Exceedance Probability

26. Example: Real Option Analysis for an irrigation modernization project in Mexico Source: Scandizzo and Notaro 2008

28. Example: investment decisions of a water supply agency in California Source: Groves et al. 2008 Hundreds of scenarios explore assumptions about climate change, resource-development, urban growth, program costs,... Scenarios evaluated according to the cost of supplying water to the end users plus the costs of incurring any shortages. Most important uncertain factors in generating high-cost scenarios identified.

34. PUBLICATION "Economic Evaluation of Climate Change Adaptation Projects - Approaches for the Agricultural Sector and Beyond": http://siteresources.worldbank.org/ENVIRONMENT/Resources/DevCC1_Adaptation.pdf GUIDANCE NOTE "Evaluate adaptation via economic analysis“: http://climatechange.worldbank.org/climatechange/content/note-7-evaluate-adaptation-economic-analysis Other guidance notes: www.worldbank.org/adaptnotes Contact: [email_address] Thank you!