In Nepal, we now know how much climate change is costing the economy today and, although lots of uncertainty remains, in the future. Or more specifically, we know for three major risk areas - agriculture, hydroelectricity and water-induced disasters.

The Government of Nepal published on the 28th April an economic impact assessment of climate change in the country, which gives a comprehensive profile of current and future risks as well as future investment needed for each area (agriculture, hydro-electricity and water induced disasters).

The headlines from the study include:

-       The estimated direct costs of current impacts across these three areas are equivalent to 1.5–2% of current GDP per year (approximately US$270–360 million/year in 2013 prices), rising to 5% or more in extreme years, with flood-related risks the major driver of these costs.

-       In the future, with increasing temperatures and erratic rainfall patterns projects, the costs are estimated to rise further, equivalent to an additional 2–3% of current GDP/year by mid-century.

-       In response to these risks, an iterative adaptation pathway is needed, which starts with current climate variability and then considers future climate change and uncertainty.

-       In relation to the medium-term risks, a major increase is needed in the three areas assessed, estimated at US$2.4 billion by 2030 (present value). 

Read the Summary Report and Briefing Note to learn more.

To reach these conclusions CDKN supported nearly 18 months of data collection, modelling and analysis. The methodology used by the expert international – local consortium team of IDS-Nepal, Practical Action Consulting (PAC) Nepal, and GCAP was carefully designed to provide accurate and relevant results, while integrating the uncertainty which exists in climate change projections. The full details are soon to be published in the full technical report, with further annexes to contain the data.

Now that the study has been published, we can reflect on what we have learnt about the process of carrying out an economic impact assessment. It has certainly been a steep learning curve! The following are some of the key messages we would give to another team about to embark on such a study:

Data, data, data…. All such studies begin by recognising that data availability will be a challenge, but we still always underestimate exactly how much impact it will have. We were in a relatively good position in Nepal, this being a government-led initiative and as such having easy access to any data which exists. It was also critical that we were able to use IITM’s climate projection data, derived from the PRECIS regional climate model which  included daily maximum and minimum temperature, and daily precipitation, at a spatial resolution of 50 km for the whole period (1961‐2099) for 240 locations in Nepal. This is the same data which was used in Nepal’s Second National Communication. The challenge came when the team was doing the detailed sector modelling and analysis, particularly for agriculture, and found gaps in reliable and consistent data across multiple years. Data gathering, storing and sharing is a major challenge in Nepal, and beyond, but the Government has recognised this, and investments are happening (for example, the Department of Hydrology and Meteorology’s growing capacity for online real-time climate data). In any case, future such projects should invest properly at the beginning of the process in reviewing data availability and putting in place mitigation measures.

The framework needs to be flexible, but will always be complicated. Economic impact assessments have in the past tended to stick with a classic scenario-based assessment, taking climate model outputs, and running models to assess the potential longer term impacts of climate change in the future. In line with guidance from the UNFCCC, the team in Nepal developed a methodological framework that takes into account that climate change and adaptation to it are a dynamic processes, starting from current variability and moving to long-term trends. Taking into account wider governance, policy and institutional capacity issues is vital for mapping out adaptation options. As the assessment in Nepal got underway, the framework had to evolve and adapt to data issues (see above) and changing priorities. Flexibility in this regards was therefore essential. Every effort was made to keep the methodology simple, but in reality such assessments will always remain a highly skilled process that only very technical experts can carry out. As a result of our project there is now a cadre of Nepali scientists able to carry out such assessments in the future, but further investment is needed to deepen their skills, and for the next generation, to ensure that models and frameworks can be adapted locally.

Uncertainty in everything. Climate change is inherently uncertain, especially when you are looking 50 years down the line. To be true to the science you have to caveat every finding and result with the recognition of the uncertainty involved. As the IPCC knows this runs the risk of diluting the ‘message’. As we came to write up and launch our findings there was a healthy struggle between those in the team closest to the science and those wishing to communicate a powerful statement about Nepal’s vulnerability to climate change. By integrating uncertainty into the methodology of the assessment the output was an ‘adaptation pathway’ which highlighted iterative risk management (continually updating policies and action based on the latest science), portfolios of actions (rather than a single focus) and low or no-regret actions whenever possible.

Embed everything locally. The greatest strength of this project was that it was Nepali led and owned. The lead partner in the technical consortium was a Nepali research organisation (IDS-Nepal) and a government steering committee guided and oversaw the process. Active working groups of all the local experts in the sectors ensured all relevant information and data was used, and that the results were accurate. An international partner (GCAP) was certainly crucial in the process, but the emphasis was on building the skills of the local team and mentoring. Wider training programmes focused on building capacity of the government and stakeholders for this type of economic assessment which was important in ensuring the findings were accepted and understood.  The investment and time required to embed the process locally was the key to making the study relevant and useful to Nepal.

Review, review and more review… Delays in a study of this type are inevitable and there is always a rush to finalise the report. But, the review of draft outputs is vital. We used a relatively large pool of local and international experts who were not involved in the study (in addition to the groups that were, see above) to review the outputs at various points. This led to some important editing and even new modelling and analysis. While the further delays were frustrating it also meant we can be confident that the results are accurate and valid and other will be confident in using them.

Decide on the ‘what next’ at the start. Perhaps the most important learning we gained was that such assessments should not be stand-alone documents, but designed as a decision-making tool. The demand from the Ministry of Science, Technology and Environment in Nepal for this project was to give them the evidence to make a strong case internationally that Nepal is extremely vulnerable to the impacts of climate change, and needs climate finance to adapt the economy. Domestically, the study also makes it clear to all stakeholders, including key line ministries, that climate change is a development issue and should be mainstreamed as such. However, for ministries to translate the economic findings and adaptation options into policy-decisions they need further technical support.

The Government of Uganda is just embarking on an economic assessment with CDKN support. We have already presented our learning from the project in Nepal to them, but welcome the opportunity to talk with others interested in or undertaking similar work so we can collectively strengthen our approach to understanding the economics of climate change

Authors: Elizabeth Gogoi, Ram Chandra Khanal, and Arif Pervaiz. For more information, contact elizabeth.gogoi@cdkn.org