Table of contents

4.1.4. Adaptation barriers – and ways to overcome them

Planning and implementing climate change adaptation policies and measures faces a number of barriers (Moser and Ekstrom, 2010; OECD, 2015). Some of these barriers are generic for most adaptation actions (e.g. uncertainty about some aspects of future climate change) whereas others are specific to the energy system or to specific components and actors in it (e.g. regulatory context). These barriers may impede the implementation of effective and efficient adaptation policies unless targeted efforts are undertaken to overcome them. Fortunately, much knowledge and experience has been gained in recent years how to address adaptation barriers. The policy framework, through its strategic, legal and regulatory mechanisms, can help or hinder action on climate change adaptation. The energy sector remains highly scrutinised by regulators and policy-makers given the strategic importance of energy for economies and societies. Prudently designed policies play a key role in addressing many of these barriers as they provide the framework for action by other key actors.

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This section gives a brief overview of important barriers for adaptation in the energy system. It also presents some generic ideas for addressing these barriers, in particular through public policies.  The overview of potential adaptation barriers below is by no means comprehensive. It is intended primarily to give an indication how public policies can address some commonly cited challenges for adaptation by non-state actors. Non-stake actors like financing institutions and insurances can also play an important role in facilitating adaptation in the energy system. However, but their role is not discussed in detail in this report. Many concrete examples of how public and private actors at different levels are successfully building climate resilience in the energy system are presented in the following sections of this chapter.

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Awareness of the (potential) need for adaptation

Adaptation requires that a (potential) ‘adaptation actor’ is aware that past and/or future climate change requires to do certain things differently than otherwise (i.e. in a constant climate). Hence, awareness of a (potential) problem is a crucial first step in the adaptation policy cycle. Such awareness can come from, among others, past experiences with managing climate or weather extremes, peer learning, stakeholder and expert meetings, government-led or other CCIV assessments reports, or a combination thereof.

Governments can help raising awareness of climate change impacts and related adaptation needs among (potential) adaptation stakeholders, in particular those that have limited experience in dealing with climate variability and change, through targeted reports, public consultations and stakeholder engagement, mandatory climate risk screening in infrastructure planning and approval, reporting requirements for critical infrastructure providers, and other public policies.

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Understanding the concrete climate change impacts and adaptation challenges

Understanding current and/or future climate change impacts is another key requirement for targeted and effective adaptation action. Important progress has been made in recent years in understanding past climate change, in projecting future change and in understanding the potential impacts on ecosystems, economic sectors (including the energy sector) and society as a whole, through substantial efforts by many actors at the international, European, national and sub-national level. As a result, many projections of climate change and its impacts in European regions have become more robust. However, there is still considerable uncertainty about other aspects of climate change that are important for stakeholders in the energy system (see Chapter 3). Furthermore, climate change adaptation in the energy system occurs in a dynamic environment characterized by rapid changes in the political, regulatory, economic, social and technological context (see Section 2.2). Hence, adaptation actors unavoidably need to take their decisions in the context of multiple uncertainties. There are many approaches for (adaptation) decision-making under uncertainty, including robust decision-making, real option analysis and the adaptation pathways approach (Haasnoot et al., 2013; Capela Lourenço et al., 2014; Watkiss et al., 2014; OECD, 2015). Their suitability in a specific context depends on various factors, such as the availability of quantitative information, the type and magnitude of uncertainties, the importance of climate change compared to other factors, the potential costs and risks of acting (too) early vs. acting (too) late, the reversibility of specific adaptation actions, and others. Hence, there is no single-best approach for planning adaptation under uncertainty.

Most actions mentioned above under ‘raising awareness’ are also relevant for improving understanding of climate change impacts. Targeted CCIV assessments, the development of user-friendly climate services and adaptation platforms, including decision-making tools, and establishing communities of practice are further ways how governments can address the information challenge.

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Identification and assessment of adaptation options

Targeted adaptation requires adaptation actors to be aware of potential adaptation options and to have some understanding of their costs and benefits (in a broad sense). Adaptation options differ widely depending on the adaptation actor and the challenge they are facing (see Chapter 3). Some of them can be addressed by minor changes in established management practices, others involve technological changes associated with increased costs, and still others require fundamental changes in how and where things are done. The actual adaptation actors have indispensable knowledge on their decision context, and they need to drive such an assessment.

Governments can facilitate the assessment of adaption options through some of the above-mentioned measures, including communities of practice, targeted adaptation platforms, reporting requirements and other ways of information sharing. Furthermore, targeted research and innovation funding can help developing new adaptation options and services, or reducing their costs for individual actors.

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Incentives for (coordinated) adaptation actions by non-state actors

Most adaptation actions in the energy system will be implemented by non-state actors. Many adaptation actions make a ‘business case’ (i.e. there expected benefits outweigh the costs) for individual actors, because they reduce damages or other financial losses, improve revenues, avoid reputation loss, or provide other tangible benefits. Hence, a well-informed actor will implement such actions without the need for policy interference. However, some adaptation actions do not make a business case under ‘pure’ market conditions, because their costs and benefits are unevenly distributed. One reason are market externalities. For example, the costs of a power blackout to a modern society are much higher than the immediate revenue losses to the power producer or network operator (co-)responsible for a black-out. A second reason is system complexity. For example, the stability of the electricity supply in most European countries depends on the co-operation of many different actors from several countries. Hence, ensuring or increasing network stability under changing climatic conditions may require coordinated actions by many actors in order to be effective. The importance of efficient coordination between different actors has increased as a consequence of the liberalisation of energy markets in Europe, which has led to market fragmentation.

Governments (and European institutions) play an important role in facilitating adaptation actions that are beneficial from a whole-society perspective but where markets provide insufficient incentives to individual actors. This can be done through additional market incentives, design standards, regulations at national and/or European level, public-private partnerships and other measures. Such policy interventions are necessary in order to ensure socially desirable levels of adaptation. However, their design, implementation and control requires considerable expertise in order to avoid inefficiencies and undesired side effects. Information asymmetry between private actors in the energy sector and policymakers developing the adaptation policy framework can be a challenge for efficient and effective market regulation.

Inefficiently regulated energy markets can themselves create barriers for adaptation. For example, regulators with price setting or advisory powers significantly influence investments made by energy utilities and the way in which investment costs are passed on to consumers. If the criteria used by regulators to assess the permissible investments and cost transfer do not take climate change adaptation into consideration, any extra costs associated with increasingly resilient investments may not be transferred to consumers, generating a further barrier to such investments.

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