Blog Post

The Cost of Climate Change in Canada

Oct 11, 2011 | Lynann Butkiewicz

RFF experts have delved into domestic climate adaptation risks and recommendations in a comprehensive report, Reforming Institutions and Managing Extremes: U.S. Policy Approaches for Adapting to a Changing Climate. But what about our neighbors to the north?

According to Paying the Price: The Economic Impacts of Climate Change for Canada—a report by The National Round Table on the Environment and the Economy—damages from a changing climate could cost the Canadian economy C$21 billion ($20 billion) to C$43 billion ($42 billion) per year by 2050. These costs come from increased pests, fires, and flooding, as well as changes in temperature and air quality.

Meanwhile, the amount spent on climate adaptation and clean energy programs adds up to only a fraction of the expected damages. The Canadian federal government has spent C$85.9 million on climate adaptation programs and invested around C$100 million over two years in research and development of cleaner energy as part of Canada's Economic Action Plan.

The National Roundtable recommends adaptation efforts that are estimated to cost less than expected damages. Suggestions are similar to recommendations in the RFF report. For example, the Roundtable recommends restricting development in flood zones. RFF Fellow Carolyn Kousky has written extensively on flood risk management, recognizing that flood risk maps are often lacking and many homeowners don’t buy flood insurance. (For more, check out Kousky’s RFF Discussion PaperImproving Flood Insurance and Flood-Risk Management: Insights from St. Louis, Missouri,” coauthored with Howard Kunreuther).

The Roundtable also recommends “strategic retreat” in flooding areas. In Resources magazine, RFF Nonresident Fellow James Sanchirico notes that abandonment may be politically challenging, but, if it “is not included as a feasible option, cost-effective adaptation policies will remain elusive.”

Furthermore, even though Canada is committed to reducing greenhouse gas emissions 17 percent by 2020 from 2005 levels, it is still one of the leaders, along with Japan and Russia, in rejecting the extension of the Kyoto Protocol. But even as mitigation efforts are slow-going, Canada could step up its adaptation efforts to help avoid significant costs.