New McKinsey Study on Climate Adaptation

From my perspective, some of the best analyses of mitigation strategies have been produced by McKinsey & Company’s Climate Change Special Initiative. McKinsey has now produced an excellent analysis of how to develop effective adaptation frameworks, Economics of Climate Adaptation Working Group, Shaping Climate-Resilient Development: A framework for Decision-Making (2009). The methodology of the 149-page report is a series of case studies of regions that are likely to experience serious climate change impacts, in both developing and developed countries.  Among the key messages from the study:

  • Adaptation planners will continue to face the daunting challenge of substantial uncertainties in climate projections. For example, scientific projections of rainfall over the next 20 years in one key region of Mali range from a decrease of 10% to an increase of a similar amount. Uncertainties at the local level make it very difficult to develop adaptation responses at this level;
  • Much of the anticipated losses associated with climate change, in the range of 40-100% in the test locations in the study, could be averted, even under a scenario of high climate change. Moreover, in most cases, the responses could be cost-effective. However, the study also emphasizes that in many cases adaptation responses would not coincide with broader economic development strategies, meaning that there are opportunity costs that must be assessed in crafting long-term strategies;
    • On the other hand, there are cases where development opportunities and effective adaptation strategies would correspond well. For example, the study indicates that development of new areas of cash crop production in just one region of Mali could offset the country’s entire expected economic loss from climate change and bring in $2 billion in additional revenue annually
  • In many cases, risk transfer mechanisms, e.g. insurance, may be the most cost-beneficial strategy to address climate risks, especially in the case of more extreme events.

The study also provides some excellent case studies of the impacts of climate change in specific regions of the world, as well as impacts on particularly vulnerable groups. In short, this is an excellent study to help bring climate change impacts alive to our students, as well as provide a good road map for how to respond in an cost-effective manner. It also provides some hope!

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