Climate change adaptation costs could reach billions annually in EU

Recent extreme weather events in Lithuania underscore the urgent need to invest in climate change adaptation, not just mitigation.

While efforts have focused on decarbonization through renewable energy and efficiency, adapting to current climate impacts is equally crucial. This involves building more resilient infrastructure, such as robust power grids, effective flood management systems, climate-appropriate roads and buildings, and drought-resistant agriculture.

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decarbonization helps reduce the scale of future climate change, while adaptation helps mitigate its damage.

The European Environment Agency estimates that adapting key EU sectors could cost between €53 billion and €137 billion annually by 2050, depending on the climate scenario. Current funding, however, only amounts to about €15-16 billion per year, revealing a massive investment gap.

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adaptation investments can be more difficult to finance than many decarbonization projects.

Financing adaptation measures presents unique challenges. Unlike renewable energy projects with measurable outputs, the benefits of resilience often lie in preventing events that do not happen, like uninterrupted power, unflooded roads, or undamaged crops. These benefits are harder to quantify, and their impact is often societal rather than directly financial for the investor.

To attract private capital, improved climate risk data, better economic benefit assessment methods, and public-private risk-sharing solutions are needed. The insurance sector is already feeling the strain, with one major Lithuanian insurer receiving over 4,600 damage claims exceeding €3.6 million after a recent storm. Agriculture remains particularly vulnerable, with only about a third of crops insured in Lithuania, leaving much of the climate risk on farmers' balance sheets.

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the value of resilience infrastructure is often an event that did not happen.

Lithuania has begun systemic adaptation planning, including a new Climate Change Adaptation Law and nearly €100 million allocated for resilience against extreme hydrometeorological events by 2029. However, resilience must become a horizontal criterion in all investment planning, from energy and transport to urban development and agriculture, ensuring that infrastructure built today can withstand future climate conditions.

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resilience to climate change should become an investment criterion.