Economic Adaptation to Climate Change

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Comparison of Bangladesh and the Netherlands

The world continues to face new environmental impacts every dawn. These environmental dangers have been associated with the increase in the level of global climate change. However, some areas of the world appear to be more vulnerable to major natural catastrophes associated with climate change. Netherlands and Bangladesh are two main countries that despite being miles apart, share a similar risk in regard to the climatic change. Although the two nations are not major contributors to the global climatic change, they pay the highest prices to nature.

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Bangladesh remains one of the most susceptible nations on the planet to climate risks. Two third of the countries rest less than five meters above the sea level, hence it's susceptible to both river and rainwater flooding, especially during monsoon. Almost every year the country experiences disasters, such as storm surges, tropical cyclones, floods, coastal erosion, and droughts, which cause a heavy loss of property and life, thus jeopardizing development activities. Similarly, the Netherlands’ coastal lowland is considered to be vulnerable to the sea level, rise hence the risk of flooding is normally eminent.

In the Netherlands, more than 85 percent of the coastal zones located five meters below the elevation, thus making its coastal areas vulnerable to the outcome of high tidal waves. Furthermore, global climate change has increased the likelihood of severe storm surges, especially in the North Sea region. Although these nations have devised a mechanism to counter the disaster associated with the climatic change, these measures have proved to be extremely costly, thus having a major implication on the economy of the county. In this paper, the economics of adaptation to climate change will be explored through a comparison of Bangladesh and the Netherlands (Watson and Michele 143)

Bangladesh remains to be the most exposed countries to climate-related disasters. Approximately 80 percent of the country’s annual precipitation occurs during the monsoon when the river combined peak flow reaches approximately 180,000 m per second. As a result, one in every five years, close to two-thirds of the country becomes inundated by floods that cause enormous damage to housing, agriculture, infrastructure, and livelihoods. In addition, the low altitude regions in the coastal parts are also normally at the risk of severe cyclones and tidal waves. On average, a severe cyclone makes a landfall once every year, leading to an enormous economic loss (Shaw, Mallick, and Islam 134).

In the last 50 years, there has been increased investment geared towards enhancing the country’s resilience against climate-related hazards. Since the 1960s, the government of Bangladesh has invested more than $ 10 billion on the structural construction, such as cyclone shelters and cyclone-resistant housing, and the non-structural one such as an early warning and awareness raising system. These investments have significantly reduced the losses and damages resulting from extreme climatic events over time, particularly in terms of injuries and deaths.

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Furthermore, through economic programs using billions of dollars, the rural household has essentially adopted new farming systems that are standard to floods, which typically overwhelm almost a quarter of the country. This has resulted in switching from the low-yielding rice to high yielding rice crops. As a consequence, agricultural production has increased rapidly over the years, thus cautioning the country against periodic climate-related catastrophes. In addition, the rising incomes resulting from the economic adaptation program initiated by the Bangladesh government have also enabled the increasing proportions of the household to establish homes that are more resilient to storm surges, floods, and cyclones (Watson and Michele 212).

Despite enormous investments directed towards increasing the country’s resilience to disasters, climate-related disasters continue to result in a substantial economic loss, thus reducing the economic growth and progress in fighting poverty. For instance, in 1998, floods resulting from the monsoon overwhelmed over two-thirds of Bangladesh, resulting in economic damages and losses amounting to more than $2 billion. This represented approximately 4.8 percent of the country’s gross domestic product. The damages and losses were split across the infrastructure, industries, and commerce, thus affecting all crucial facets of economic development. In addition, cyclones have resulted in economic damages and losses amounting to $1.7 billion or approximately 2.6 percent of the gross domestic growth in 2007.

Half of the losses occurred in the agricultural and infrastructural sectors, thus rendering the country to be on the verge of the economic crisis. On average, the damages experienced in the last decade in terms of the livelihood and infrastructural losses have been estimated to amount to 1 percent of the country’s gross domestic product. However, these statistics exclude significant losses in terms of life. It is also crucial to note that damages and losses have been devastating in areas concentrated with poor people, thus affecting them disproportionately.

Residents in regions that are significantly affected live in tin or thatch houses that are more prone to the destruction during the event of a cyclone, flood, or storm surges. Furthermore, individuals in these areas often rely on climate-sensitive sectors such as fisheries and agriculture as a major source of livelihoods. As a consequence, climate-related disasters leave poor residents with a limited capacity to recover (Bangladesh: Climate Change Cell, Dept. of Environment 64).

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In the Netherlands, the coastal areas contain high population densities with crucial economic actions and bio-network amenities. These areas have been subject to coastal flooding; hence, climate change poses a significant threat to these regions. As a result, billions of dollars have been invested in different plans in order to caution the state against the aggressive climatic changes. In the Netherlands, Delta programs aimed at handling the consequence of climate change in the country through the construction of dams and dikes.

Furthermore, the Netherlands addresses coastal protection activities through the development of a comprehensive approach to counteract the flood risk. The total amount spent on the flood protection has been estimated to amount to more than € 550 million annually. This includes the fund set aside by the government for the implementation of the Delta Law and Delta Programme. Furthermore, with regard to the recommendations of the delta commission, the yearly investment is projected to increase to more than € 1.6 billion particularly attributed to flood protection.

In between 1998-2015 periods, measures adopted in the Netherlands in an attempt to protect the nation’s coast against erosion, flood, and storms amounted to approximately € 3.4 billion, with coastal protection expenses amounting to approximately € 225 million. On average, yearly coastal maintenance expenditures for the country amount to approximately € 63 million. However, this expenditure excludes the cost incurred in the maintenance of primary weirs, closure dike, and storm surge barriers. In 2008, the annual expenditure amounted to approximately € 172.5 million.

This included the sand beach nourishment undertaken to strengthen the dike and weak links. With regard to Sand Nourishment Programme, approximately € 743 million used for strengthening the coastal links for the period between 2007 and 2015, while € 300 million were budgeted for increasing the strength of the primary dike for the period between 2007 and 2015. Besides, the capital and maintenance measures directed to flooding and erosion protection have also received a substantial amount of funds. For instance, the Dutch government increased the fund to € 19.45 directed towards spatial planning studies.

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Conceptual Literature Review

According to Intergovernmental Panel on Climate Change, adaptation to climate change has been defined as an adjustment in human or natural systems in response to actual or expected climatic changes and their effects, which harm or exploit beneficial opportunities. Furthermore, the adaptation entails making required investments in order to reduce potential damages and losses resulting from the climatic change. It is through the implementation of adaptation measures and adaptive capacity of the system, thus, increases the sensitivity and reduces the vulnerability of the society to the impacts of the environmental change. Numerous types of adaptations have been embraced that include anticipative, reactive, autonomous, and planned adaptations. However, Intergovernmental Panel on Climate Change notes that the challenge for a decision-maker has been to identify actions that are currently appropriate and likely to be robust to overcome long term environmental uncertainties at the economically sustainable cost (67).

According to Philander, the modeling results have shown that the investment costs to the coastal zone adaptation are likely to be uneconomic because the costs are likely to by far exceed any benefits. Therefore, defending the entire coastline by building dikes and sea defense, such as it is the case in the Netherlands, may essentially be an inappropriate strategy. However, a better strategy would considerably protect crucial investments and natural resources, such as harbor, ports, and beaches, and zone the crucial new infrastructure from the vulnerable areas to the greatest extent possible. Furthermore, the emphasis needs to be placed on soft options that enhance the capacity in early warning systems such as the use of satellite imagery for coastal zone management. Moreover, the new gas and oil development, as well as related infrastructure in Western Europe will need to be designed with regard to climate adaptation (Philander 123).

According to Hossain and Selvanathan, there is a need for complementary investment in both soft and hard adaptation options that are essential to ensure effective use of infrastructure and meet the need of residents. The authors have emphasized the need of the adaptation investment in the hard infrastructure supported with a complementary investment. It has also noted that the policy shift plays a crucial role in supporting coping strategies for climate shocks, especially at the household level.

In areas that are prone to natural related catastrophes, strengthening dialogue and cooperation with the neighboring countries has essentially yielded considerable benefits that effectively deal with challenges resulting from climate change. Multi-sectoral interventions increase regional resilience through the reduction of the development gap that is a particularly effective form of investment. As a result, the regional approach to disasters related to climate change is crucial, because climate change is a global challenge (Hossain and Selvanathan 65).

According to Mendelsohn, as long as the cost and benefit of adaptation are borne by the same decision-maker, the private adaptation will occur and tend to be efficient. Nonetheless, Mendelsohn believes that for the government’s involvement in adaptation on three grounds: information, costs, and equity. The cost of private adaptation is borne by victims of climate change, while the equity means that the polluter needs to pay for damages to the pollution. With regard to the adaption to climate change and the resulting consequence, the argument fits better globally and across the sectors, rather than nationally (Mendelsohn 147).

Approximations and estimations on the economic damage have presented different economic values. According to Stern, estimates of the climate change damage on a global scale range from 2 to 3 percent of the global gross domestic product. Stern’s review presents the impacts of climate change on the world economy and indicates that the damages will essentially rise to 5-6 percent in spite of the measure implemented (Stern 86).

According to the World Bank, the assessment of the impacts of climate change and economic cost adaptation in developing nations has received considerable attention. The World Bank reports indicate that the cost associated with the climate change adaptation between 2010 and 2050 range from $70 to $ 100 billion, this is because a global temperature is anticipated to increase by 2 degrees Celsius by 2050. Nonetheless, there remains uncertain climate change projections and effects, as well as uncertain costs and benefits of the alleviation and adaptation measures that significantly impact the investment mitigation and adaptation measures. For example, the investigation on the effects of climate change on flood risk in the river basin indicates that upward overflow trends are related to extreme flows (World Bank 122).

According to the European Commission, the sea-level rise will significantly affect the coastal areas in Europe with the flood causing major destruction to both property and infrastructure. Furthermore, the Commission stresses that there has been a wide range of uncertainty surrounding the economic loss estimate resulting from climate change. As an illustration, the number of people affected by the flood due to climate change is estimated to reach 250,000 by 2020 while the annual economic damage estimated to amount to $25 billion. In addition, the number of people affected by the flood resulting from ice melt is anticipated to range between 121,000 and 425,000, with an estimated annual damage cost ranging from € 19 to 37 billion. Furthermore, a wider range of results has been projected, especially as the temperature continues to rise. Therefore, this uncertainty needs to be put into consideration during the economic adaptation and policy formulation (Jeroen 46).


The adaptation to climate change has received increasing attention in the climatic change policy debates, especially with regard to the evaluation of the economic adaptation strategies. In most instances, the scientific literature has only focused on impacts, vulnerability issues, and constraints to the economic adaptation. Nonetheless, little effort towards the cost and benefits the adaptation to climate change has been realized. In both nations, the risk from cyclones and storm surges remains eminent, irrespective of the cost-enormous programs implemented to increase the nation’s resilience. As can be inferred from the analysis of the previous damages resulting from a cyclone and storms in Bangladesh, a single storm would result in top damage, amounting to more than 2.4 percent of the gross domestic product (Environmental Economics Unit, Department of Economics, Goteborg University 69).

Furthermore, the severity is still expected to increase by 2050 due to the continued temperature change. When combined with the increasing sea level, cyclone induced storms surge is further projected to overwhelm an additional 15 percent of the coastal area. Although the economic expansion is anticipated to expose more assets to overcome the risk by 2050, there is expected a structural shift in the national economy away from the climate delicate sectors, as well as the development of cyclone resilient housing. The shift is expected to limit the damages and losses from a single severe storm surges. As a result, this will lead to saving of approximately $ 9.2 billion or approximately 0.6 percent of the GDP (Bangladesh: Climate Change Cell, Dept. of Environment 34).

The existing investments that strive to reduce the effects of cyclone induced storms have provided a solid foundation, upon which the country will adopt measures that reduce potential damages in the future. Nonetheless, the investment is insufficient to solve the existing climatic risk, thus doubting the future suitability of such measures. In 2050, the total investment in Bangladesh will essentially amount to approximately $ 5,516 million with annual recurrent costs of $112 million needed to protect the nation against the storm surge risk.

Strengthening 43 polders against the existing risks need the government to invest more than $ 2,462 million. Furthermore, the annual recurrent expenditure cost of approximately $ 49 million will be required. Even if the existing cyclone shelters programs could provide a sufficient capacity to protect the entire coastal area at the risk of damages, the additional 2,930 shelters would still be required to protect the country by 2050 with at an approximate cost of $628 million in order to accommodate the anticipated population growth (Bangladesh: Climate Change Cell, Dept. of Environment 67).


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This makes it apparent that protecting the nation against the added risk from the climate change will need the country to further strengthen 59 polders, induce afforestation of the sea-facing polders in order to reduce the hydraulic load of the storm surges. In addition, it is essential to construct additional 5,702 cyclone shelters and provide incentives for enhancing the affordability of cyclone resilient building. However, these additional measures are anticipated to cost more than $ 2,426 million in investments and approximately $50 million in the annual expenditure.

Moreover, recognizing the uncertainties in the timing and magnitude of the added risk from climate change remains to be a prudent strategy that would be crucial in addressing the existing risk that current coastal residence faces. This can be achieved through the construction of multi-purpose shelters. This will play a crucial role in protecting the population against the existing risks of polders being overtopped by the natural disaster. In addition, it has been noted that such actions need to be accompanied by research in order to improve information regarding the timing and spatial aspect of the added distribution risk from climate change (World Bank 35).

With regard to the inland flooding in Bangladesh, the country has been incurring significant losses and damages in terms of crop losses and infrastructure destructions, as well as the disruption of commerce and industrial activities. For instance, a flood inundated over two-third of the country leading to the $ 2 billion economic loss or approximately 4.8 percent GDP. As a consequence, the adaptation mechanism has been implemented since then. Nowadays, a flood of a similar magnitude cannot result in significant damages.

However, the cost of protecting against the existing risk was not estimated because of data unavailability. However, the cost of protecting road and railway networks, river embankment to highly productive agricultural lands were estimated to cost more than $ 2,671 million with an annual cost of $ 53 million. The adaptive capacity of the household in Bangladesh is low, with poor urban dwellers being the most disadvantaged due to the availability of limited opportunities. However, the most common form of adaptation activities normally includes temporary migration (World Bank 56).

The anticipated see rise resulting from the change in climate condition will essentially result in a substantial amount of flooding from the sea. Nonetheless, the current techniques applied by the government, such as dikes and coastal defenses, can be maintained sufficiently, even when the sea level rises to 1.5 meters higher. However, if the rise in the sea level increases above 1.5 meters as a result of an increase in the melting rate of the ice sheets, then the maintenance of the existing dikes and sea defenses walls requires more effort and input in order to adapt to such changes.

This implies the increased expenditure of the expansion of dikes in order to enhance their resilience. According to the Advisory committee for primary Dyke Financing, this will mean an increased annual cost for the maintenance of dikes. The flood protection in the Netherlands currently costs each inhabitant approximately 40 to 45 euros per year. This is equivalent to approximately 0.15 percent of the gross national product in the country (European Commission 45).

As the sea level rises, the natural drainage capability of the regional water system and rivers due to the gravity is reduced; the water level increases in tidal estuaries and rivers, and the influence of the tides and saltwater becomes evident in the inland. In the Netherlands, a 2-meter rise in sea level will imply that the tidal influence would move upriver as far as Tiel. Furthermore, the sea level rise of approximately 60 centimeters will further rise in the sea level, resulting in the reduction of natural downhill flow that requires higher dikes. This trend means that the vulnerability of the Netherlands as a whole to flooding will continue to increase in terms of the percentage of the population and economic value considered at risk by the year 2040. The potential economic damage as a result of flooding will increase in that period up to 2040 by a factor of between 2 and 3, depending on the population and economic growth (European Commission 56).

Nonetheless, ensuring that dikes meet the required standards, a practice that is predicted to be finalized by the year 2020, and the casualty risk resulting from the climate-related disaster is anticipated to decrease by a factor of three. The risk of economic losses and damages will also decrease by a factor of 1. However, the country still needs alternative measures, because only differentiated protection level and floodable dikes’ scenario can essentially result in the lower damage and casualty risk. With regard to the estimated optimal sea level rise analysis of 85 cm per century, it is evident that the low lying Netherlands, such as Randstad, will essentially be resistant to climate change and rising sea levels for many centuries in the future. However, considerable efforts are still needed in order to maintain the current protection level. It is further evidence that in terms of the continued coastal reinforcement and sand suppletion, it will be possible to keep pace with climate dynamic changes in sea levels (Climate-ADAPT 76).

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Despite significant investment over the past few decades in both Bangladesh and Netherlands, the climate-related disaster continues to have significant damages. Without additional actions, these dangers will certainly persist in the foreseeable future. Although there is high uncertainty about the magnitude and timing of the added climatic change risk, the risk and potential damages are expected to increase. In a fiscally constrained environment with competing priorities, the economic adaptation actions need to be prioritized and sequenced. In order for both countries to adopt economically to the risks presented by climate change, it recommendable to implement an effective measure to enhance the country’s resilience to natural disasters.

It is essential for the two countries to conduct research and knowledge building because it is crucial to improve the targeting of future actions. Given the high cost of infrastructure investment and the expected gradual increase in climate risk over the decades, it will be crucial to adapt infrastructures incrementally in response to the added climate change-related disasters. This is crucial, especially because of the large uncertainties concerning the magnitude and timing of the added risk from climate change.

In respect to this, the research and knowledge that focus on improving the spatial and temporal precision of current climate-related risks forecasts and related early warning systems would facilitate better targeting of future economic adaptations. Such actions will not only provide immediate benefits but will also enhance the capacity to address climate risk in the future. Furthermore, supplemental research activities that focus on reducing the substantial uncertainty risks in the future will also play a crucial role in guiding the extent of the adaptation that will need to be prioritized (Hertsgaard).

It is also recommendable to enact sound development policies that will act as a foundation of the adaptation agenda. This is because sound development policies provide the foundation for the adaptation action in the medium to long term. The adaptation normally takes place in the context of development, which describes both the opportunities to adapt and generates the means from adapting to climate change. The expected structural transformation in the economy away from the climate-sensitive sector such as agriculture involves climate risks while urbanization provides new opportunities to manage the risks better. Furthermore, rising incomes enable the household to adapt and better cope with climate-related disasters. For example, increasing the residents' ability to afford climate-resilient houses will be an essential policy change.

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It is recommendable to facilitate the adjustment of design standards for the infrastructure that is essential for future resilience. This is because infrastructure investment is long-lived and expensive hence yields large benefits when designed appropriately. It is essential to institutionalize the development of appropriate standards equal to the potential climate risks over the expected life of the assets. For instance, the probability of more intense precipitation has an effect on the unpaved roads, especially in rural areas that are vulnerable to being washed away by the flood.

A single lane sealed road normally requires a higher capital cost, but it provides higher resilience to extreme weather conditions. The application of appropriate standards to the infrastructure investment will not only provide a flexible way to generate the most recent research outcome but will also provide a natural way to modulate adaptation efforts. This will ultimately scale up the adaptation efforts, especially when the risk is increasing or restraining the efforts (Hossler).

It will also be recommendable to improve governance and stakeholder participation in order to complement adaptive investments. This is because the effectiveness of hard investments depends on both people’s uptake and the ability of the targeted population to access. The enhanced governance and stakeholder participation has been crucial determinants of the access and uptake. Accessing women need a gender-sensitive plan of intervention such as the provision of separate facilities for women in cyclone shelters.

A pro-poor adaptation investment that includes social protection, investment, livelihood diversification, as well as social and human capital, is crucial in strengthening the local resilience to climate change. Furthermore, it is essential to strengthening the regional cooperation, because it is pivotal in terms of the long term adaptation. Other recommendable measures include the development of climate resilience cultivars and cropping, as well as addressing the current climate-related risks.