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01 Feb 2008

What do we know about the economics of adaptation?

Asbjørn Aaheim / Marianne Aasen

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The impacts of climate change can be analysed with the same economic assessment tools used for analysing the impacts of changing economic conditions. The fundamental concept is that impacts of climate change will affect the behaviour of economic agents, who will adapt autonomously, but autonomous adaptation is not always the optimal solution. The paper explains that by analysing the behaviour of people as a consequence of climate change, the resulting scenarios can help policy-makers in designing policies where autonomous adaptation does not reflect a social optimum. However, economic analyses of this topic are still scarce. The importance of concentrating on such analyses is that structural change is a continuing process in all European economies, but climate change may contribute to faster and more vigorous changes with corresponding challenges for policy-makers.