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344 A.MarkandyaandM.González-Eguino
14.1 Introduction
The bulk of the literature on finance for addressing climate change in developing
countries relates tomitigationandadaptationmeasures.TheUNEPEmissionsGap
Report (2015)andtheAdaptationGapReport (2016)provideasynthesisof thecur-
rent availablefinance fromdifferent sources foractivitiesunder thesecategories, as
well as likelyfinanceneeds in the future.There is littledocumenteddataon thedif-
ferencebetween theadaptationneedsand the levelsofestimated impactsofclimate
change.Thisdifference is generally referred to in the economicsof climate change
literatureas the residualdamages (Chambweraet al. 2014), andalso in someof the
literature, as the ‘unavoided losses anddamages (L&D) fromclimate change’ (see
introduction byMechler et al. 2018). Fewestimates of the residual damages using
economicmodellingexistandtherehasnotbeensufficientdiscussionofthemethod-
ological choices and robustnessof thesemodel estimates.This chapterpresents the
underlying analytics and reviews the estimates of total climate change damages as
gauged in the economic IntegratedAssessmentModel (IAM) literature1 for differ-
entmitigationscenariosasabasis forcalculating residualdamages. It discusses the
uncertainties surrounding these estimates andprovides interval estimatesby region
and (where possible) by country for selected countries.Uncertainty, discount rates
andothermethodologicalchoicesplayanimportant role.Wediscuss thesebutfocus
ontwoimportantones:sourcesofuncertainty inherent toIAM-EquilibriumClimate
Sensitivity and damage functions, and how these will increase uncertainty of the
damagesand residualdamages.
It is important tostate that,while thedamagesfromclimatechangeareestimated
here using IAMs and top-down damage functions, there is a far-reaching debate
as to the proper economic methods to use for assessing economic damages and
the cost of adaptation.Othermethods utilised in the economics of climate change
impacts (seeBurke et al. 2016) range from improvements in bottom-up estimation
of damages (Carleton andHsiang 2016) to expert elicitation approaches (Pindyck
2016).Particularly,moreresearchisnowdevotedtorepresent“non-market”damages
such as changes in human health and biodiversity that could be sizeable, but are
largelyomittedfromcurrentestimates(seealsoChambweraetal.2014).Combining
the estimates of total damageswith those for adaptation, based on the same set of
models, thechapterderivesasetofestimatesofpossibleL&Dforselecteddatesand
under different RCP scenarios. Several issues challenging the robustness of these
estimates are discussed in the chapter, including: ex anteversus ex post losses and
damages,non-monetarydamages, irreversibilityandtheroleofeconomicgrowth in
the affected countries. The chapter concludeswith a discussion onwhat the IAM
estimatesimplyforclimatefinanceintheshortandmediumterm,giventhemandates
andprogrammesof themainfinancinginstitutions,suchas theGreenClimateFund.
1The economic IAMliterature is to bedistinguished froma scenario-based IAMliteraturewhere
models, rather than calculating optimal responses to warming building on economic rationality,
projectfuturewarmingbuildingonkeydriversofclimatechange, includingdemographicvariables,
economicoutput, lifestyleand technology (seee.g.Nakicenovicet al. 2000).
Loss and Damage from Climate Change
Concepts, Methods and Policy Options
- Title
- Loss and Damage from Climate Change
- Subtitle
- Concepts, Methods and Policy Options
- Authors
- Reinhard Mechler
- Laurens M. Bouwer
- Thomas Schinko
- Swenja Surminski
- JoAnne Linnerooth-Bayer
- Publisher
- Springer Open
- Date
- 2019
- Language
- English
- License
- CC BY 4.0
- ISBN
- 978-3-319-72026-5
- Size
- 16.0 x 24.0 cm
- Pages
- 580
- Keywords
- Environment, Climate change, Environmental law, Environmental policy, Risk management
- Categories
- International
- Naturwissenschaften Umwelt und Klima