Economics of systemic risk (CCRA4 Economics Advisory Group)

About this document

The Climate Change Committee (CCC) commissioned the Fourth Climate Change Risk Assessment (CCRA4) Economics Advisory Group (EAG) to develop a pragmatic framework for how the CCC and government can use economics to understand and adapt to systemic climate change risk.

The group was chaired by Elizabeth Robinson and included Samira Barzin, Carlos Eduardo Young, Angela Francis, Laurie Laybourn-Langton, Theresa Lober, James Rising and Vera Trappmann.

This report reflects the views of the EAG and does not represent the views of the CCC.

Key messages

• The EAG highlights economic methods can be used to make the case for adaptation where benefits are highly uncertain, or difficult to quantify:
  
  • Presenting costs alongside storylines or accompanying narratives of benefits.
  • Determining where certain co-benefits can justify investment.
  • Hindcasting to illustrate benefits of adaptation in analogous situations, to justify proactive investment.
    
• Beyond making the case for action on systemic risks, government can also take actions today to make society more resilient to systemic risks, including:
  
  • Identifying actions which deliver broad resilience, particularly in areas where the consequences of systemic risks are uncertain.
  • Ensuring some redundancy or buffer (such as the UK Systemic Risk Buffer, applied currently to banks and building societies), particularly in critical areas, to improve capacity to respond when systemic risks do occur.
    

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