To assess the budgetary implications of climate impacts and adaptation in a macroeconomic setting, quantitative information of both aspects is required. Damages induced by climate change or related to weather extremes are very diverse and occur at different scales and locations. Thus, the challenge of quantifying these damages includes the translation of projected climate parameters into a common metric that allows for an economic evaluation thereof. In this project we rely on damage data quantified in one of our current EU-H2020 projects (Boere et al. 2019, Lincke et al. 2018 and Schleypen et al. 2019), where impact models have been applied to translate physical information on changes in climate parameters, such as air temperature, precipitation, evaporation etc., into economically usable metrics, such as monetary values or percentage changes. Examples include agricultural models calculating yield changes, hydrological models calculating flood risk or physiological models determining work ability. Importantly, damages depend on the globally achieved emission pathway and the socioeconomic development and are therefore provided consistent with the RCP-SSP framework, which has been adopted by the IPCC.
The quantification of adaptation expenditures involves the challenge, that current public adaptation is typically included in the general public budget without specific earmarking of funds towards adaptation purposes. Often, climate adaptation is also not pursued as the primary but as a secondary goal of a project (OECD DAC 2016), or mainstreamed into other policy fields (Berkhout et al. 2015; Bierbaum et al. 2013). To support practical decision-making on public adaptation, however, we require quantitative assessment of specific adaptation measures and their potential to avoid direct and macroeconomic damages. For that purpose, we build on work undertaken in previous and current research projects, where we investigated the Austrian National Adaptation Strategy (Bachner et al. 2019 and Van der Wijst et al. 2021).
Eventually, the implications of weather and climate change induced damages and adaptation for the public budget are quantified accounting for the various direct and indirect channels, along which climate change affects economies and public budgets. To this end, collected economically usable damage data for a broad range of weather and climate change induced damages at a global scale as well as the data on adaptation expenditures in Austria are implemented into a multi-regional, multi-sectoral CGE model (see section 3.3. for details) using previously developed techniques, i.e. the changes in the climate and economic parameters are implemented as an initial shock to economic parameters that induce economy-wide feedback effects. Examples for modelling such a shock include changes in the productivity of input factors (land, capital, labour), in the regional endowment of productive land, capital, labour as well as structural demand shifts or structural expenditure shifts (for example for public adaptation).
