The growing benefits of climate adaptation
I keep banging on about the need to invest in climate change adaptation rather than mitigation since our chances of keeping climate change under control are minuscule at best by now. In that respect, I am glad to see a study by Columbia University researchers on how much adaptation measures have already added to the economy and how much more they can add in the future.
The idea is that if people realise that extreme weather events are becoming more frequent and more severe, they will automatically adjust their expectations and start building houses differently, invest in air conditioning, etc. This resulting increase in climate resiliency, in turn, increases GDP growth in the long run because severe weather events cause less damage.
To test this hypothesis, the researchers collected data on cyclones in 109 countries from 1980 to 2019 and on heatwaves in 139 countries during the same period. Then they estimated by how much the damage from these extreme events has declined due to changing expectations about future occurrences. The chart below summarises the key result.
Between 1980 and 2019, the study estimates that GDP-per-capita growth has increased by some 0.2% per year (or 7% in total) as people became better prepared for and adapted to tropical cyclones. The effect of heatwaves was about half that, with a cumulative increase in GDP/capita of 4% between 1980 and 2019.
That isn’t much, but as climate change becomes worse and severe weather events become even more frequent, the gains associated with adaptation become larger. Until 2100, the authors estimate that climate change adaptation to cyclones can increase GDP/capita by 0.5% per year. That would mean that GDP/capita in the year 2100 is some 50% larger than without further adaptation. In the case of heatwaves, the adaptation gains could be even larger at a cumulative 56% between today and 2100.
I think climate change adaptation is increasingly becoming big business, and the investment opportunities associated with that trend will be significant.
Estimated GDP/capita gains from climate change adaptation
Source: Hong et al. (2025)
Economists applying a ton of models to create a new model that models (into the past and future no less) basic human behaviour: experience, learn, adapt. But for these noble scholars that appears to be entirely new:
'that communities with experience with violent weather adapt'...'The reason is that these countries are being hit more frequently by disasters and hence lack of adaptation gets penalized more'.
Devastating truthbombs, you economist you. But will they next model the cold turn of the 60s and 70s?
‘Bad news elevates extreme weather risk, which leads households and firms to learn and adapt, thereby lowering damages for each subsequent disaster arrival'.
Well look at that: more common sense. And apparently media hot heads are unwittingly promoting climate adaption...
'We define a country as being hit by heatwaves if the mean summer temperature
is, relative to historical summer norms, above 1 C'
That is not how heatwaves generally are measured / defined. The Netherlands are 2C warmer since 2000, are we in a continuous 'heatwave'? (And then there is the fact that globally warming is typically caused by nights being warmer / less cool, not by days getting warmer - Is thát bad or good? Should one adapt for that?).
Finally, no climate-related study can do without Satan's Scenario:
'for modelling into the future ‘we take this base growth rate from the SSP5’.
Of course they do. Since that's the reïncarnation of RCP8.5.
Do you understand what this study actually does? It applies RCP8.5, the doomster's preferred but technically and physically absolutely impossible model, to project into the future the....benefits of adaptation.
RCP8.5, since 2018 used in at least 34.000 'climate studies' (Google scholar, climate study can mean anything: gender & climate, Taylor Swift albums under SSP5 etc etc), and which has absolutely dominated generic media, now officially is good for anything. From predicting doom to...GDP growth from climate adaptation.
But...wait before you base your investment strategy on SSP5.
The IPCC projects SSP2 (the former RCP4.5) for 2100, Half the C of SSP5/RCP8.5.
And thus half the GDP growth? Let's wait for a model to model that...Modellers be modelling.
'I think climate change adaptation is increasingly becoming big business, and the investment opportunities associated with that trend will be significant.'
Now thát is true.
Big biz with the EU creating climate- and digital 'resilience' (sic) funds, whose B end up somewhere entirely else. Conveniently creating EU debt as a fait accompli. (Oh, and Jens Stoltenberg wanted electric battle tanks for NATO. Chairman Rutte's opinion on e-tanks is still like every Rutte-opinion: unshaped and fluid like Barbapapa).
And big biz with annually hundreds of gov B floating around looking for purpose like a western middle class secular citizen (they’re going to miss Gaza…). And with p funds and insurance companies 'guided' towards certain 'investments'. To invest in EU debt for instance.
So indeed, PE and other outfits looking after high-wealth individuals' interests (quite literally i guess) have been gorging themselves on risk-free 'investments'. And with windparks and solar projects largely halted because the real price has shown up, investing in 'adaptation' could indeed be the next, gov-supported, boon. Pardon, boom.
Since the climate for a, let's say very secure form of capitalism, for a wealthy minority, which apparently lies awake over the fate of the Planet (or are they just showing Good Taste?), keeps getting better. It seems SSP5/RCP8.5 is now directly and unashamedly used to fuel capitalism itself with gov B. Sme might call it nudging, others nicking.