Estimating current and future adaptation costs to the UK

Climate change adaptation involves strategies and actions taken by governments, businesses, and individuals to maintain productivity and prevent damage amidst rising temperatures and more frequent extreme weather events.^a These measures include modifying work patterns, installing air conditioning, investing in flood defences, upgrading infrastructure (for example, ICT infrastructure, power, water, road and rail), and securing food and other supply chains. While these measures can significantly reduce the economic impact of climate change, they come with additional costs, adding to the fiscal pressures of climate change.

In the UK, the Climate Change Committee (CCC) provides advice to the Government on the risks the UK faces from climate change damage. The Department for Environment, Food and Rural Affairs (Defra) has overall ownership of the UK’s adaptation strategy to address these risks, with responsibility for addressing the various risks and enacting the plans lying across multiple departments.

Current spending on adaptation

The extent of existing public investment in adaptation is currently unclear. There is no unified reporting or accounting framework for adaptation investment in the UK, and this, combined with the decentralised nature of adaptation responsibilities, makes it difficult to collate the current expenditure. HM Treasury’s Green Book guidance requires departments to consider both 2°C and 4°C scenarios when putting together bids for investments with long lifetimes.,^b But despite this, we have found few examples of published cost-benefit analysis comparing projects built to either 2°C or 4°C specification. And, where costs do exist for 4°C compatible investments, no indication is provided of what the alternative costs for projects not built to these standards would have otherwise been.^c The Institute for Government (IfG) has reported that the Green Book guidance on adaptation was “largely viewed as nice but optional rather than as a real requirement to take adaptation into account” by departments.^d Without suitable accounting practices and requirements, it is difficult to isolate the funds directly allocated to adaptation from those that would have been deployed towards essential infrastructure regardless (that is, what the marginal cost of adaptation investment is).

Future adaptation costs

Anticipating future adaptation costs presents additional challenges. On top of the current uncertainty on baseline investment, there is uncertainty around the impact on weather patterns in different climate scenarios, how these would specifically affect the UK, and therefore what our investment requirements will be. For instance, modest sea level rises may call for minimal coastal defences, whereas significant increases could necessitate the relocation of entire communities. Defra incorporates CCC guidance into practical initiatives, as outlined in its National Adaptation Programme (NAP3).^e However, the National Audit Office, the CCC and the IfG have identified the need for a more coherent and goal-oriented adaption policy framework, on the basis that the latest guidance (NAP3) does not include clear adaptation goals, implementation details, or costs.^d-g

The CCC has begun work on the next Independent Assessment of UK Climate Risk, which is due to be published in 2026.^h We therefore expect to turn to assessing the potential fiscal costs of adaptation in the coming years, with the hope that some of the currently identified issues and gaps in government reporting and strategy on adaptation will have been, at least partially, addressed in the meantime.