How much money should we spend to protect ourselves from climate change?

Investing in climate change resilience

 

Peter Gist, an economist and Director of Arup Management Consultancy, visited the University of Bristol this week to give a lecture asking why we aren’t more resilient to climate change and what we can do about it.

It is a complicated question. Spending millions of pounds of taxpayers’ money is not without its risks. In April, a report was released showing that the £473 million stash of Tamiflu was essentially useless.  It was stockpiled against the risk of a flu pandemic that never happened.  Was this money wasted?  Only because the problem didn’t arise.  The risk to public health was too high to leave to chance.

The same can be said of resilience to climate change. You’re damned if you do and you’re damned if you don’t. Gist nailed it when he said, “the huge costs of not getting it right tend to lead to people acting like rabbits stuck in the headlights”.

Investment returns

Diverting resources to resilience measures is an investment, and Gist explained that this means trying to get the best return for your pound, in this case by limiting losses. It’s extremely difficult to calculate this for climate change, thanks to a lack of information, inherent uncertainties about the frequency and impact of the problem, and a decision process divided between numerous groups with different priorities.

An important economic technique when calculating the cost:benefit of different resilience methods is discounting. A price paid in today’s money cannot be directly compared with the future benefit of the scheme, so the value of the future benefit (prevention of loss) is transformed into today’s prices. An event predicted to occur far in the future will be severely discounted, making it unlikely to seem worth the cost to us today.

The problem with discounting is similar to that of politics; the focus is on short-term pressing concerns not future problems, even if they are predicted to have a huge impact. Gist explained, “in the case of severe weather events, we are almost always bound to discover that we haven’t done enough”.

Uncertainty

 

The Dawlish train line was damaged in winter storms. Image credit: BBC News

Even if the risks were quantifiable, it would still be difficult to know where to channel resources because of the uncertainty in forecasting models. Would it be better, for example, to improve the resilience of the Dawlish train line to flooding, or to build an entirely new route to avoid the problem entirely? We need to know how often the line is likely to flood in the future, especially with regards to climate change, but Gist noted how difficult it is to confidently link global warming to specific extreme weather predictions.

Improving the decision

Value for money is still the aim of the game. How can we make better decisions on climate change resilience in the future?

Reducing the discount rate for long term effects is vital. Gist agrees with Lord Nicholas Stern that we should hold the impacts on the next generation with greater or equal importance than our own, rather than passing the problems on to them.

To counteract the uncertainty, of course we must keep collecting data and improving the models, but Gist believes we should go further. We need to consider more “no regrets” options, for example trees in a new development provide shade and enhance water run off, as well as making the area a more desirable place to live. He urged, “uncertainty should be an imperative to act, not an excuse not to”.

Consulting the wider public is vital in improving spending decisions. Gist described how difficult it is to factor in non-monetary benefits into the investment planning models. An area of moorland or forest might have incalculable value to people living nearby, but the property developers in the next town might see it as cut price real estate. Only by talking to a large range of people, institutions and regulatory bodies can you understand the different priorities in play and begin to factor in benefits that aren’t measured in pounds and pence. Pragmatically, Gist believes that all politicians should consult the people involved, whether in local councils or at the national level, because everyone takes part of the responsibility for the consequences and by removing the blame it clears the path to making decisions.

Get involved

Limited resources mean that we can’t always have the perfect solution for every problem. Money must be spent in the most beneficial way possible, so we can’t avoid making these investment choices. Gist urged the audience to get involved in decisions, make your voice heard and for the scientists among us to keep up the research that might yield more information. On the other hand, it is vital that we don’t fall victim to “analysis-paralysis”. If you’re waiting for the perfect data set before making a decision, you’ll be waiting a long time.

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