National capacity-building increases ability to respond to both A and M

Insurance spreads risk and assists with A; managing insurance funds has implications for M

Trade liberalisation with economic benefits (A) increases transport costs (M)

Monitoring systems and reporting requirements that cover indicators of both A and M

Management of multilateral environmental agreements benefits both A and M

Inter-relationships between adaptation and mitigation will vary with the type of policy decisions being made, for example on different scales from local project analysis to global analysis. As discussed in Section 18.4.3, there will be clear M^A linkages in many mitigation projects, for example ensuring that adaptation is built into the project design (e.g., considering and adjusting for water availability for longer-term hydroelectric renewable or bioenergy/biofuels projects). Similarly, in the design or appraisal of adaptation projects, A^M, the consideration of mitigation options can be brought in, for example in considering reduced energy use in project design. These linkages might be considered through an extension of project risk analysis as part of the appraisal process, but can also be included in cost-benefit analysis explicitly in an economic appraisal framework.

At the policy level (e.g., portfolios, funding, strategies), the same M^A and A^M issues apply, but the wider potential for cross-sectoral linkages makes simultaneous consideration of adaptation and mitigation, AilM, more important. For example, the shift up to a major (country level) energy policy towards mitigation might need to assess demand changes from adaptation across a wide range of sectors. There may be a need to consider some explicit trade-offs between adaptation and mitigation, J(A,M).

At the global level, the potential for J(A,M) becomes possible within a theoretical framework (see Section 18.4). There has been discussion of the potential for adaptation and mitigation as substitutes within narrow economic analysis (cost-benefit frameworks), and some studies have tried to assess the optimal policy balance of mitigation and adaptation using CBA based on IAMs. However, recent reviews (e.g., Watkiss et al., 2005) have shown that policy-makers are uncomfortable with the use of CBA in longer-term climate policy, because of the range of uncertainty over the relevant economic parameters of marginal mitigation costs and marginal social costs and damages avoided, but also because of the significant lack of data on the costs of adaptation. Instead, wider frameworks are considered to be more informative, using multiple aspects and risk-based approaches, for example iterative decision-making and tolerable windows (see also the risk matrix in Chapter 20). Stern (2007) explicitly adopted a risk-based framework appropriate for guiding policy from analysing the marginal costs and benefits at the project level to determination of public policy that affects future economic paths. He recognised that adaptation plays an important role, but not in an explicit tradeoff against mitigation, in long-term policy.

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