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FEATURE: Economics of climate change in South Asia

CDKN’s Elizabeth Colebourn and Ram Chandra Khanal report from Asian Development Bank (ADB) workshops on the Economics of Climate Change held across South Asia in July where they showcased lessons from CDKN’s work in Nepal.

New research and evidence is published every week on the impact of climate change in South Asia: changing rainfall patterns, projected temperature rises and whether and the extent to which the Himalayan glaciers are melting.

We also see and experience the complicated relationship between the physical impacts of climate change, and its effect on economic development.

In Delhi we have just survived what was reported as the hottest summer in 300 years, which caused regular power blackouts as everyone turned up their air conditioner on full. While in Nepal, repeated dry winters have in recent years caused major cereal deficits.

Governments in the region recognise that their economic growth and poverty reduction efforts are being put at risk by climate change. But, by how much, and exactly how and where is less clear.

Yet this detail is vitally important. Knowing the breakdown of the economic impact of climate change allows Governments to target their scarce resources and direct their policies at where it will have most benefit.

A growing number of donors and institutes have recognised this and an ‘Economics of Climate Change’ research agenda is developing.

The Asian Development Bank (ADB) is undertaking a regional assessment of the economics of climate change in South Asia, following the successful assessment in South East Asia. National consultations were held recently where experts and policy-makers were invited to input into the national studies and models being used.

The ADB assessments will provide medium and longer-term modelling of the economics of climate change. This will produce headline economic cost estimates of the overall effects on the economy, similar to the Stern Review, as well as provide aggregate sector estimates. The primary purpose is to highlight that climate change is an economic and development issue of the highest priority.

It is using a high resolution Regional Climate Model – downscaling ECHAM 5 (RegCM version 4.1.) and plans to assess physical impacts at regional, national and sectoral level and then use these for macro- economic and sectoral economic modelling.

CDKN participated in the workshops in Delhi and Kathmandu and shared ideas and learning from our projects in the region, in particular from a new CDKN project in Nepal which is going to build on the ADB initiative.

The project, being implemented by IDS-Nepal, Practical Action Nepal and GCAP will focus in detail on the important agriculture and water sectors in Nepal. As well as considering the potential economic costs of climate change, it will also develop a climate compatible adaptation pathway, using multiple lines of evidence.

The project will start by studying existing impacts of climate variability and extremes, as well as emerging climate trends. By grounding this analysis in current and planned development policies, the project will look at the key risks – and the priorities for building resilience – in national and sector policy.

It is also considering the medium to long-term economic effects of climate change, sampling across a range of downscaled climate projections for Nepal to capture uncertainty. Adaptation pathways will then be developed which include the early actions needed to address the potential long-term economic costs.

The project has a strong capacity building theme, and will undertake extensive stakeholder consultations. The aim is to provide practical policy-relevant information and to support the Government to assess the potential effectiveness of different policy options and climate compatible development pathways.

While the work of CDKN, ADB and others is advancing the state of knowledge, the economics of climate change remains an emerging field. There are some big questions which everyone is grappling with. For example, how to consider uncertainty within the climate models and translate this into robust and resilient adaptation? How to combine bottom-up and top-down data and modelling? How to effectively link the time periods of assessment – short, medium or long term? Both the ADB and CDKN initiatives provide valuable case studies for how to tackle all such questions and advance the methodology considerably.

There is a lot to learn from these complementary studies and collaboration and cross- learning between the two studies in Nepal is already underway. For example, the ADB team is assessing the impact of climate change on agriculture (i.e. crop yield) by using Decision Support Systems for Agrotechnology Transfer (DSSAT) model, and the CDKN team will use this analysis, along with other evidence lines, to build up the analysis of long-term risks.

The workshops held provided the first of many opportunities for CDKN, the ADB and our partners to share experiences and learning. Together we will be able to advance understanding of the economics of climate change – and the economics of adaptation – which will ultimately allow us to estimate the potential cost of climate change and the most efficient way of adapting to it.

Elizabeth Colebourn is a Project Manager for CDKN Asia based in New Delhi, and Ram Chandra Khanal is a Country Coordinator for CDKN based in Kathmandu. For more information on CDKN’s project in Nepal on the Economics of Climate Change, contact

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