Select Committee on Treasury Fourth Report


Adaptation in the United Kingdom

117. The Stern Review concluded that even if mankind were able to reverse the growth in global emissions of greenhouse gases, adaptation would still be required to counter the negative impacts caused by time lags in global and local ecosystems. The Environment Agency echoed this conclusion, arguing that "no one disputes that we need to get to grips both domestically and internationally with emissions, but adaptation is also important because, irrespective of what we do, because of the inertia in the system, we are going to see the impacts of climate change over the next 25 years".[193] Professor Ekins pointed out that even if the UK succeeded in achieving a cut in emissions of 60% from current levels, there "will be considerable climate change and we will need to adapt". By way of example, he pointed to the direct physical effects for the UK:

    such as increased flooding and increased cost of home insurance against that risk, if we decide to do it through the private market. I do not think that the public will have a great deal of choice about that. We are already increasing the cost of flood defences against these kinds of events. That is money to be spent by taxpayers which obviously cannot be spent on something else.[194]

Sir Nicholas explained that, in future, it was likely that the south of England would have much wetter winters and dryer summers. He mentioned a couple of likely pressure points where adaptation would be required: Storm surges up the Thames were likely to be much more severe, which would put a great deal of pressure on the London sewerage system; heat stress in summer was likely to increase, with implications for the London Tube.[195]

118. The Association of British Insurers (ABI) acknowledged that the Government had shown "considerable international leadership on mitigation issues" and had set out significant plans to address energy use and emissions in the 2006 Pre-Budget Report and its planned legislative programme".[196] However, the ABI believed that Government had so far failed to tackle adequately the social and economic impacts of escalating climate risks: "policy statements consistently fail to address these issues despite the clear warnings set out in the Stern Review".[197]


119. The Government has made a commitment to a coordinated approach on adaptation in Public Service Agreement 27:

As a complement to our mitigation efforts, the UK will develop a robust approach to domestic adaptation to climate change, shared across government, and encourage adaptation to climate change internationally.[198]

120. DEFRA is "leading on the development of a cross-Government Adaptation Policy Framework to be published in the spring [2008]. The Framework aims to provide a consistent approach to building adaptation into policies, and a coherent way to identify cross-cutting risks and opportunities and to assist in prioritisation of action across Government."[199] The Minister also pointed out that Government spending was only part of the picture:

    What the Government decides it needs to spend is only a part of the picture. Part of what DEFRA does that is important is to support the UK Climate Impacts Programme.[200] This is an independent body which publishes analysis about the potential impact of climate change, the likely requirements for adaptation. It is there doing an important job in trying to help us understand the implications more clearly—and when I say us, not just government: it is there for the public and, importantly, it is there for business as well.[201]

121. The Environment Agency argued that the Government was indeed already collecting information about adaptation efforts across Government. In 2005 the Government published an adaptation strategy, and since then had been gathering information on adaptation measures at a local and national level, with the intention of making that information available through the web.[202] However, making the public aware of adaptation spending, though it may be important, will not necessarily lead to changing behaviour: the Environment Agency mentioned the example of flood risk, where awareness is high amongst floodplain-dwellers, without this awareness necessarily translating into action that enables people to be prepared for a flood.[203]

122. The Stern Review outlines a need for climate-proofing measures that will cost 0.05-0.5% of GDP each year. At present, it is very difficult to make an estimate of the amount currently spent by the Government on such adaptation, let alone by UK businesses and individuals. We recommend that the Treasury track and publish spending on adaptation in order to raise public awareness of the impact of climate change and enable enhanced scrutiny of Government's progress under PSA 27.


123. The Environment Agency described flood risk management as "probably the most important element of a UK climate change adaptation strategy". The Stern Review stated that flood damage costs the country 0.1% of GDP and that this could rise to 0.2 to 0.4% if global temperatures rise by 3 to 4°C and no adaptation measures are taken.[204] The Environment Agency believed that 2.3 million of the 25 million homes in England and Wales were in flood risk areas, which equated to land and assets worth £237 billion. The Environment Agency cited research by the University of Dundee, which calculated that the median cost of rectifying flood damage for an average household would be around £28,000. Of the 2.3 million homes currently at risk, 517,000 are at high risk (that is, a greater than 1 in 75 chance of flooding in a given year) and this number has been rising.[205]

124. The UK has unusual flood risk management arrangements, which the Environment Agency described to us:

    The UK is pretty unique in that the insurance industry underwrites the cost of flood damage; and the voluntary agreement that they have with government is enshrined in a statement of principle, and the key component part of that is that the insurance industry is prepared to continue with insurance provided that the Government put in adequate investment.[206]

The implication of this arrangement is that, if the insurance industry considers that the Government is providing inadequate funding, the industry might cease to underwrite flood damage. As the Environment Agency put it:

    If you have inadequate investment and you get more frequent storm events, more damage, then obviously the insurance industry will make business decisions on the cost of insurance. In the insurance industry at the moment there is a fair degree of cohesion through the Association of British Insurers, but as [flood] risk increases there is more risk of individual companies ploughing their own furrow.[207]

The ABI stressed that flood insurance would be offered in the private market only if there was adequate public risk management:

    We also need to look well ahead in planning flood defences. Britain is one of the few countries where flood insurance is widely available from the private market. Insurers want this to continue, but it is dependent on adequate risk management. Some 570,000 homes are now at high flood risk, compared with the estimate of 220,000 when current flood defence spending levels were set in 2002.[208]

125. Expenditure by the Environment Agency on flood risk management increased from £303 million in 2001-02 to £483 million in 2006-07 (including the local levy), an increase in real terms of 40%.[209] The Minister added that "specifically on planning and coastal defences, in 2002 DEFRA was spending £394 million; in 2005 it was £564 million."[210] The ABI argued that Government expenditure on flood defence peaked in 2004 and was now falling in real terms, stating that the Government cut the Environment Agency's flood management budget by £15 million in 2006-07.[211] Commenting on the flood management budget, the Minister said that "clearly, as we would expect and as I think Parliament would expect, DEFRA are managing within the department the financial pressures they have and that is their job to do that".[212] Dr David King from The Environment Agency argued that the UK had the right policy frameworks in place, but nevertheless questioned the level of investment from the Government:

    I think we have got the right policy frameworks in place and the areas of principal vulnerability are around flood risk and, indeed, on water resources. If I take flood risk firstly, the policy frameworks set up by Government in Making Space For Water is a good one and the basket of activities that the Agency deploy to reduce risk are about raising awareness, about warning, about building and retaining defences and are the right activities, but there is a question about the level of investment.[213]

126. In 2004, the Office of Science and Technology's Foresight programme published a report which identified that the UK could be facing flood losses of up to £27 billion per year by the 2080s if necessary adaptation measures were not taken.[214] The Environment Agency argued that, in the context of the then-forthcoming 2007 Comprehensive Spending Review, the case for increasing resources to reduce flood risk was compelling.[215] They predicted that their flood defence budget for 2007-08 would be "in the order of £440 million," and that "any reduction or erosion of that would lead to increased flood risk and we would expect to see an upward trajectory in funding in line with the Foresight Study and the next Spending Review".[216] The ABI echoed this view.[217] The Environment Agency argued that there was "certainly a need to continue with the level of [existing] investment and, indeed, to grow that level of investment".[218] Dr David King from the Environment Agency said:

    The Foresight Study had two principal points: one that risk will increase and, secondly, there is a need for increasing investment up to the level of about £1 billion per year if you are to keep annual damage at the order of two billion pounds. So, I think it is really a question about increasing levels of investment for flood risk management, and certainly we would like to see that in the next Spending Review. If you look at capital rationing, if you look at construction price inflation and if you look at need, we estimate that an additional £150-£200 million extra in the next Spending Review period is required.[219]

127. The Environment Agency pointed out that current investment in flood defence was extremely cost-effective to the economy as a whole:

    At the moment the cut off is a benefit of six to one for the economy. That means that a lot of projects which only have a benefit of four to one or five to one do not get built at the moment because we are capital constrained. Also the internal rate of return on that investment is 27%, compared to smaller numbers for road and rail investment, so it is very cost-effective for the economy. If that investment was not made, then the economy would pick up those costs through higher insurance costs in the long run; so it is not money that is wasted, it is money that will be cost-effective in any case, and the risks will increase over the next 20 to 30 years.[220]

128. In the 2007 Comprehensive Spending Review, the Government announced an increase on expenditure on flood and coastal erosion risk management from £600 million in 2007-08 to £800 million in 2010-11. Alongside this, the Government also pledged to introduce an adaptation toolkit of £10 million per year, to "assist communities in adapting to change where constructing defences is not the most appropriate means of managing flood and coastal erosion risk".[221] In response to the Comprehensive Spending Review, the ABI argued that the increased level of funding was inadequate and that "millions of homeowners and businesses around the country have been let down by the Government's failure to commit sufficient money to new and improved flood defences".[222] The ABI argued that Government spending plans for the next three years were less than they were requesting, even before the floods of Summer 2007. However, the Chief Secretary to the Treasury, the Rt Hon Andy Burnham MP, rejected the ABI's claims:

    In all of the preparation leading up to the CSR and the submissions that the ABI made … there was a repeated reference to the need for £750 million per annum for flood defences by the year 2011. The CSR delivers £800 million per annum in the final year of the CSR. I do not believe it is right to say after the CSR that the commitment that we have given is not enough because we have more than met the ABI's request.[223]

129. Investment in flood defences is extremely cost-effective, if targeted carefully. The announcement of additional funding in the 2007 Comprehensive Spending Review is therefore welcome. We also believe that effective flood risk planning involves long-term investment, so requires long-term financing and advance warning of the funding that will be provided. We therefore recommend that the Government make a public commitment to the level of flood defence spending beyond 2010-11 in advance of the next spending review.

Adaptation in developing countries

130. Sir Nicholas stressed the particular importance of adaptation for developing countries, because they would be hit "hardest and earliest".[224] The Stern Review commented that:

    Adaptation to climate change—that is, taking steps to build resilience and minimise costs—is essential. It is no longer possible to prevent the climate change that will take place over the next two to three decades, but it is still possible to protect our societies and economies from its impacts to some extent—for example, by providing better information, improved planning and more climate-resilient crops and infrastructure. Adaptation will cost tens of billions of dollars a year in developing countries alone, and will put still further pressure on already scarce resources. [225]

131. Referring to his meetings with African leaders, Sir Nicholas said that "for them adaptation is a very big issue. They have already seen desertification and conflicts in Darfur, floods in Mozambique in 2000 and the droughts in Kenya in the late 1990s. For them adaptation is a reality; they have to face it and we should do all we can to support them".[226] Sir Nicholas told us that an increase of around 5°C in average global temperatures would transform how and where people lived. That kind of temperature increase "would very likely involve substantial movements of population and potential conflicts". He commented that one of the drivers behind the Darfur crisis was the movement of pastoralists (because of changing climate) and the difficulties they encountered when encroaching on the land of agriculturists.[227]

132. Farhana Yamin of the University of Sussex agreed that the threat posed to the UK by climate change "paled into insignificance" when considered against the threat to the developing world:

    We [in the UK] have a huge amount of infrastructure, human resources, financial resources and knowledge … to be able to deal with these eventualities and, in general, developing countries, especially the poorest countries, are far more vulnerable to the actual threats of climate change itself and have the least ability to respond. For example, the budget that has just been mentioned in terms of £440 million [for UK flood defence spending] is large compared with Africa where there is a very vast need to improve the weather forecasting systems on the ground.[228]

133. Ms Yamin saw encouraging signs that, over the last two years, the development agencies and international financial institutions had begun to take climate change considerations into account and were providing assistance to developing countries where adaptation to climate change was needed. Nevertheless, she was of the opinion that the adaptation funding shortfall was conspicuous even by the standards of other development areas:

    In terms of the amount of resources, there is always never enough, but on adaptation it is very significantly disproportionate to the amount that is actually needed. The World Bank calculated last year in the Gleneagles Process something like $9 billion to $41 billion was needed on an annual basis. It is very difficult to track the amount of funding going to adaptation due to the diversity of funds, but in terms of the dedicated climate change funds that we have at the moment, we have about $230 million pledged to date to devote to adaptation activities. Amongst roughly 140 countries this is not very much even to take them forward on the process of the planning side.[229]

134. According to Ms Yamin, the most pressing concerns facing the developing world included improving their understanding of what would happen to climate risk sectors such as agriculture, fisheries and tourism, because, although they were improving, the current climate change models were too coarse to be of use when designing adaptation policies.[230] This view was echoed by Kate Hampton from Climate Change Capital, who highlighted the lack of adequate climate modelling information in the developing world.[231] The Government confirmed in October 2007 that it was "actively exploring how to support more effective adaptation [in developing countries], including through better risk management tools, technology and finance."[232] In December 2007, the Government announced a new research study, working alongside the Netherlands and the World Bank, that would help developing countries understand and prepare for the impacts of climate change.[233]

135. In Chapter 2 we noted the Government's work in assisting rapidly developing countries, such as China and India, move to low-carbon economies, but the impact of climate change will hit some of the least-developed countries hardest. We recommend that, in response to this Report, the Treasury outlines its policy towards assisting the least-developed countries with their climate change adaptation needs, and the extent and nature of work that has been carried out so far in respect of this policy. We further recommend that, in order to highlight the importance of such assistance, the Treasury specify and ring-fence that part of the Department for International Development's budget which is given to funding overseas climate change adaptation.

193   Q 377 Back

194   Q 4 Back

195   Q 142 Back

196   Ev 120 Back

197   Ev 120  Back

198   "PSA Delivery Agreement 27, H M Treasury, October 2007, p 3, para 1.2 Back

199   Hansard, 468, 6 December 2007 Back

200   UK Climate Impacts Programme is funded by DEFRA and based at the University of Oxford. It coordinates research into how climate change will have an impact at regional and national levels.  Back

201   Q 273 Back

202   Q 396 Back

203   Ibid Back

204   Stern Review p viii Back

205   Ev160-162 EA Back

206   Ev 161 Back

207   Q 375 Back

208   Ev 121 Back

209   Building and maintaining river and coastal flood defences in England, NAO Report, June 2007, page 12, para 1.8 Back

210   Q 271 Back

211   Ev 121 Back

212   Q 270 Back

213   Q 362 Back

214   Foresight: Future Flooding, Office of Science & Technology, Executive Summary p 13 Back

215   Ev 159 Back

216   Q 363 Back

217   Ev 121 Back

218   Q 363 Back

219   Q 367 Back

220   Ibid Back

221   2007 Pre-Budget & Comprehensive Spending Review, p 123, para 7.58 Back

222   "Government has failed on flood defence spending", ABI press release, 9 October 2007. Back

223   Treasury Committee, First Report of Session 2007-08, The 2007 Comprehensive Spending Review, HC 55, Q 124 Back

224   Q 143 Back

225   Stern Review, page vii  Back

226   Q 144 Back

227   Q 130 Back

228   Q 364 Back

229   Q 386 Back

230   Ibid Back

231   Q 126 Back

232   Moving to a global low carbon economy: implementing the Stern Review, H M Treasury, October 2007, page 3,  Back

233   "UK announces new study on climate change adaptation at Bali Back

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