Costing Adaptation:

Preparing for Climate Change

in India
Arabinda Mishra
25th November 2010
New Delhi
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Evaluating adaptation action
 The ‘ideal’ economic analysis:
 We estimate the benefits of the measures relative to the baseline
and the impacts line
 We estimate the costs of the measures and select those that
have the highest net benefits.
 Problems with this:
 Uncertainty
 Dynamic nature of the baselines etc.
 Lack of knowledge
 Benefits are very complex to estimate in money terms
 Impacts will depend on amount of mitigation

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TERI-BC3 study on adaptation costs for
India (2010)
 Considers additional adaptation measures for
India under different climate scenarios
 Focuses on the medium-term (by 2030 to
2050)
 Covers five key sectors – human health,
coastal zones, water, agriculture, and forest
ecosystems
 Uses simplified bottom-up methodology

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Human Health
 Key result is that the additional annual
adaptation costs for malaria, diarrhea and
malnutrition under different scenarios of
development are in the range of US$ 171- 546
million in the unmitigated scenario and US$
141- 445 million in a scenario of stabilization at
550ppmv, for year 2030.
 A stabilization scenario allows for a possibility
of achieving approximately 15% to 18%
reduction in estimated annual additional costs
of adaptation in the health sector, depending
on the development scenario.
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 Our estimates are lower than those of the 2009 WB
study
 $ 850 million/year adaptation costs for malaria and
diarrhoea in the entire South Asia
 Still the additional burden is considerable and most
of it will be covered under the public budget, which
has not been enough to meet even the current
needs of the health sector
 Statistics for 2006 show that India’s total health expenditure
was 3.6% of GDP – lower than the average (4.3) for
countries in the ‘low income group’ and much less than the
global average of 8.7% (WHO 2009)
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 The study provides state level cost estimates for the
first time
 Two states – West Bengal and Andhra Pradesh – expected
to account for about 40% of the estimated additional annual
cost of adaptation for diarrhoea in India in 2030
 Most of the malarial burden under the climate change
scenario would be concentrated in NE India and some
coastal states, both on the West Coast (Maharashtra,
Karnataka, Kerala) and East Coast (Orissa, W Bengal)
 Also, a first attempt at distinguishing between
preventive and reactive measures (for malaria)
 as per results, cost of prevention is expected to be much
higher than cost of treatment

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Coastal Zones
 Study area – India
 SRES scenario considered – A2
 Time Frame – 2030
 Sea Level Rise projection – 0.3m (upper limit for 2030)
 The study ignores autonomous adaptation
because the impacts of climate change on
the coastal zones are primarily beyond
coping capacity of the individuals and would
require planned interventions.

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 The adaptation options considered are beach
nourishment, shelterbelt plantation (which also
includes mangrove regeneration), cyclone risk
mitigation through cyclone shelters, and other
coastal protection.
 The resulting estimates indicate annual costs of
about US$ 760 million or about 0.06% of gross
domestic product (GDP) over the period to 2030
 Accounting for costs of autonomous adaptation
through migration and reactive measures to address
second-order effects of disasters would raise the
overall cost figure
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Agriculture
 Costs are calculated at the disaggregated level
of Agro Climatic Zones (ACZs)
 Autonomous adaptation
 Planned Adaptation
 Autonomous adaptation: Farmer’s revenue
losses considered as an upper bound assuming
the farmer will spend at least that much on
autonomous adaptation strategies.
 Planned adaptation: The cost of extension of
ongoing adaptation relevant programmes and
activities in identified ACZs

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 Irrigation related measures Other measures
Irrigation related measures in Increase in All ACZs Temperature
ACZs with decrease in rainfall rainfall with decrease Threshold
in rainfall limits

Artificial Recharge Command National National Food

Area Rural Security
Development Employment Mission
and Watershed Guarantee (NFSM)
Management Scheme

Watershed Development (CADWM)  (NREGS)

Desert Development Programme    

Repair, renovation and restoration    

of water bodies
Drought Prone Area Programme    

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 The cumulative costs of adaptation in the
agriculture till 2050 estimated to be around US$
2 billion for autonomous adaptation and around
US$ 54 billion in the case of planned adaptation.
 Annual costs estimated to be around US$ 1.4
billion per year (comparable to the WB estimate)

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Freshwater Resources
 Estimates at river basin level for measures to
address deficits and inland flooding
 About 58% of the deficit is met through
supply-side measures, and of the rest, about
80% may be met from demand-side
measures
 Our cost estimate of US$ 0.6 billion per
annum is quite modest compared to the
World Bank estimate of US$ 2.0–5.4 billion
per annum
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Forest Ecosystems
 Previous studies either ignored this sector or
provided estimates based on an ad hoc increase in
conservation budgets. In contrast, this study based
the estimates of actual damages and the costs of
making it good where feasible.
 With a non-regret approach, the estimated annual
costs of forest adaptation for 2030 amount to US$
144 million.
 In the long term (2075 and later), the costs will be
substantial (about US$ 1.5–3 billion per annum).

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Insights from the TERI-BC3 study

 The scope for government intervention on

adaptation is large even in the short- and medium-
term with all its information constraints
 The nature of such intervention would be additional
to and different from business-as-usual
development programming
 The scale of action required is large and likely to
increase as we receive more knowledge about
impacts and include more sectors for intervention
(though development may act as a mitigating factor
by building up coping capacity over time)

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Key implications

 Mobilizing additional resources

 Role of public finance
 Institutional arrangements

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Resource mobilization
 Broad-basing the domestic effort
 Identifying the role of private corporate sector – agriculture
(value chain), health, housing, and infrastructure likely to
provide opportunities
 Financial institutions (insurance, micro-credit)
 Reorienting programmes
 ‘Climate proofing’ development investment and climate
action for poverty alleviation
 Payment for adaptation services?
 E.g. bundling carbon benefits of forest ecosystems with
adaptation services

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Public finance

 Strong case for direct public investment in the

short to medium term, specifically for
 Generating strategic information
 Building infrastructural and institutional capacity
 Fiscal incentives for promoting autonomous
adaptation
 Technology adoption
 Risk pooling behaviour
 Social safety nets
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Institutional arrangements
 Action on adaptation in India is largely going to be at
the state level
 The federal context is crucial
 Inter-governmental transfers can potentially promote
adaptation planning
 Governance issues largely neglected in adaptation
discussion
 Engaging stakeholders in decision-making – what protocols
to ensure that the most vulnerable are marginalized
 A monitoring role for community institutions?
 Coordination / convergence across government agencies /
programmes

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In conclusion
 The current estimates of adaptation costs are still very
crude and there is a lot of scope for improvement.
 The design of adaptation measures will be more
accurate the more bottom-up they are.
 Downscaled information however comes with a trade-off
(in terms of higher degree of uncertainty); while acting on
adaptation, the uncertainty factor needs to be
appropriately weighted among options.
 The economic analysis of adaptation is generally poorly
understood in policy circles; hence there is a need for
creating capacity.
 Finally, the concept of adaptation is dynamic and there
would be a constant need to monitor and evaluate
options and resource requirements.

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Thank you