Page - 344 - in Loss and Damage from Climate Change - Concepts, Methods and Policy Options

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).