Developing climate adaptation economics to tackle the warming climate

Climate change is no longer only a future environmental risk. Heatwaves, floods, storms and sea-level rise are already shaping household welfare, business operations, supply chains and public finance. A new review published in the Journal of Management Science and Engineering（ISSN:2096-2320） examines how economics can help societies understand and manage this adaptation challenge.

The review, by Xi Ming and Hongbo Duan from the School of Economics & Management at the University of Chinese Academy of Sciences analyzed 6,248 publications from 1978 to 2025, points to several priorities for future research: high-resolution adaptation databases, stronger causal evidence, better models of deep uncertainty and damage functions, and greater attention to political economy, social equity and cross-regional network effects.

Combining bibliometric mapping with a synthesis of methods, empirical evidence and theory, the review traces how climate adaptation research has evolved from scattered studies of agriculture and disasters into a broader field covering households, firms, markets, international cooperation and welfare.

"We found that adaptation takes many forms," says Duan. "Households adjust consumption, cooling use, farming practices and migration decisions. Firms respond by upgrading production processes, diversifying suppliers, relocating activities and investing in technology."

"These actions can reduce near-term losses, but adaptive capacity is uneven: low-income households, farmers in vulnerable regions and small and medium-sized enterprises often face sharper financial, informational and institutional constraints," explains Ming.

At the macro level, the review highlights that adaptation and mitigation are not simple substitutes. Adaptation can protect societies from damages that are already unavoidable, but relying on adaptation alone may weaken emissions-reduction incentives and leave long-term tail risks unresolved.

"Mitigation alone, meanwhile, cannot fully protect communities from near-term climate impacts," says Duan. "The authors also find that adaptation assistance, trade adjustment, migration, capital reallocation and industrial restructuring can reduce aggregate welfare losses, while also creating distributional tensions across regions, sectors and social groups."

The authors note that climate adaptation is not only about defending against climate hazards — it is about designing economic systems that help households, firms and regions adjust without deepening inequality.

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Contact the author: Hongbo Duan, School of Economics & Management, University of Chinese Academy of Sciences, Beijing, 100190, China. Email: hbduan@ucas.ac.cn

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