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The Economics of Climate Change in Kenya

Key Messages

  • Existing climate variability has significant economic costs in Kenya. Periodic floods and droughts (extremes) cause major macro-economic costs and reductions in economic growth.
  • Future climate change will lead to additional and potentially very large economic costs. These are uncertain. However, aggregate models indicate additional net economic costs (on top of existing climate variability) could be equivalent to a loss of almost 3% of GDP each year by 2030 in Kenya.
  • Costs include potential threats to coastal zones (sea-level rise), health burdens, energy demand, infrastructure, water resources, agriculture and loss of ecosystem services. The study has addressed the potential impacts and economic costs in these sectors.
  • These highlight the importance of preparing for future climate change. While it is difficult to predict effects with confidence, there is a need to plan robust strategies to prepare for the future, rather than using uncertainty as a reason for inaction.

How can adaptation help?

  • Adaptation can reduce the economic costs of climate change but it has a cost. The costs of adaptation are still emerging. A number of categories of adaptation have been identified that relate to the balance between development and climate change.

  • An initial estimate of immediate needs for addressing current climate as well as preparing for future climate change for Kenya is $500 million / year (for 2012). The cost of adaptation by 2030 will increase: an upper estimate of the cost is likely to be in the range of $1 to 2 billion / year.

  • The study has also prioritised early adaptation across the sectors. These studies demonstrate that adaptation has potentially very large benefits in reducing present and future damages. However, while adaptation reduces damages, it does not remove them entirely. Residual impacts in Kenya, particularly for some regions and groups are expected and need to be managed.

Low carbon growth

  • The analysis has considered future emissions for Kenya, consistent with planned development Emissions of greenhouse gases (GHG) could double between 2005 and 2030. Moreover, plans across the economy could ‗lock-in‘ Kenya into a higher emission pathway.

  • The study has investigated a low carbon alternative pathway. This finds that a large number of no regrets‘ options that would enhance economic growth, as well as allowing further access to international carbon credits. They also have economic benefits from greater energy security and diversity, reduced air pollution, reduced environmental impacts.

  • The study estimates energy related emission savings of 22% could be achieved by 2020, relative to the baseline, even for a small selection of options. Over 80% of these options can be realized at net negative cost. When carbon credits are included, this amount is likely to be even higher.

  • Overall, because of its location, availability of resources and socio-economic conditions, the study concludes that there are significant economic benefits for Kenya in following a low carbon development path, as well as large environmental and social benefits.

Suggested citation

Stockholm Environment Institute (2009).The Economics of Climate Change in Kenya: Final Report submitted in advance of COP15. Stockholm Environment Institute, Stockholm, Sweden 65 pp.

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