Using markets to adapt to climate change

Abstract

Even under the most ambitious greenhouse gas emissions mitigation scenarios, climate change will continue to affect human well-being for generations, with the severity of these impacts differing across mitigation pathways. Adapting to climate change is thus a necessary complement to mitigation. Because individuals, businesses, and communities benefit directly from their adaptation choices, the incentives they face as individuals to adapt are generally stronger than the incentives they face to mitigate emissions. Yet evidence to date suggests that communities are not systematically adapting to recent climate changes (1). What can policy-makers do to facilitate adaptation? Here, we draw on a burgeoning field of economic research on climate adaptation to identify when and how markets can be a promising tool for effective and efficient adaptation.