Source: Adapted from Nicholls and Tol (2006).

Source: Adapted from Nicholls and Tol (2006).

More extensive adaptation measures have been evaluated in some developing countries (see, for example, Box 17.3). For the 2030 horizon in Mali, Butt et al., (2005) estimate that adaptation through trade, changes in crop mix, and the development and adoption of heat-resistant cultivars could offset 90 to 107% of welfare losses induced by climate change impacts on agriculture.

In addition to their effect on average yield, adaptation measures can also smooth out fluctuations in yields (and consequently social welfare) as a result of climate variability. Adams et al. (2003) found that adaptation welfare benefits for the American economy increased from US$3.29 billion (2000 values) to US$4.70 billion (2000 values) when their effect on yield variability is included. In the case of Mali, Butt et al. (2005) show that adaptation measures could reduce the variability in welfare by up to 84%.

A particular limitation of adaptation studies in the agricultural sector stems from the diversity of climate change impacts and adaptation options but also from the complexity of the adaptation process. Many studies make the unrealistic assumption of perfect adaptation by individual farmers. Even if agricultural regions can adapt fully through technologies and management practices, there are likely to be costs of adaptation in the process of adjusting to a new climate regime. Recent studies for U.S. agriculture found that frictions in the adaptation process could reduce the adaptation potential (Schneider et al., 2000a; Easterling et al., 2003; Kelly et al., 2005).

With regard to adaptation costs and benefits in the energy sector, there is some literature - almost entirely on the United States - on changes in energy expenditures for cooling and heating as a result of climate change. Most studies show that increased energy expenditure on cooling will more than offset any benefits from reduced heating (e.g., Smith and Tirpak, 1989; Nordhaus, 1991; Cline, 1992; Morrison and Mendelsohn, 1999; Mendelsohn, 2003; Sailor and Pavlova, 2003; Mansur et al., 2005). Morrison and Mendelsohn (1999), meanwhile, estimate net adaptation costs (as a result of increased cooling and reduced heating) for the U.S. economy ranging from US$1.93 billion to 12.79 billion by 2060. They also estimated that changes in building stocks (particularly increases in cooling capacity) contributed to the increase in energy expenditure by US$2.98 billion to US$11.5 billion. Mansur et al. (2005), meanwhile, estimate increased energy expenditures for the United States ranging from US$4 to 9 billion for 2050, and between US$16 and 39.8 billion for 2100.

Besides sea-level rise, agriculture, and energy demand, there are a few studies related to adaptation costs and benefits in water resource management (see Box 17.4) and transportation infrastructure. Kirshen et al. (2004) assessed the reliability of water supply in the Boston metropolitan region under climate change scenarios. Even under a stable climate, the authors project the reliability of water supply to be 93% by 2100 on account of the expected growth in water demand. Factoring in climate change reduces the reliability of water supply to 82%. Demand side management measures could increase the reliability slightly (to 83%), while connecting the local systems to the main state water system would increase reliability to 97%. The study, however, does not assess the costs of such adaptation measures.

Dore and Burton (2001) estimate the costs of adaptation to climate change for social infrastructure in Canada, more precisely for the roads network (roads, bridges and storm water management systems) as well as for water utilities (drinking and waste water treatment plants). In this case, the additional costs for maintaining the integrity of the portfolio of social assets under climate change are identified as the costs of adaptation. In the water sector, potential adaptation strategies such as building new treatment plants, improving efficiency of actual plants or increasing retention tanks were considered and results indicated that adaptation costs for Canadian cities could be as high as Canadian $9,400 million for a city like Toronto if extreme events are considered. For the transportation sector, Dore and Burton (2001) also estimate that replacing all ice roads in Canada would cost around Canadian $908 million. However, the study also points out that retreat of permafrost would reduce road building costs. Also, costs of winter control, such as snow clearance, sanding, and salting, are generally expected to decrease as temperature rises.

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