Are we willing to give what it takes? Willingness to pay for climate change adaptation in developing countries

ABSTRACT

Climate change adaptation is gaining traction as a necessary policy alongside mitigation, particularly for developing countries, many of which lack the resources to adapt. However, funding for developing country adaptation remains woefully inadequate. This paper identifies the burden of responsibility that individuals in the UK are willing to incur in support of adaptation projects in developing countries. Results from a nationally representative survey indicate that UK residents are willing to contribute £27 per year (or a median of £6 per year) towards developing country adaptation (US$30 and $7 using the World Bank's purchasing power conversion factors). This represents less than one-third of the back-of-the-envelope $100–$140 per capita per year that the authors estimate would be needed to raise the $70–$100 bn/yr recommended by the World Bank to fund developing country adaptation. Regressions indicate that willingness to pay is driven mostly by a combination of beliefs and perceptions about one's own knowledge levels, rather than actual knowledge of climate change. We conclude that, to engage the many different audiences that make up the ‘public’, communication efforts must move beyond the simple provision of information and instead, connect with people's existing values and beliefs.

KEYWORDS:

• Climate change adaptation
• contingent valuation
• developing country
• environmental economics
• development aid/assistance

Acknowledgements

Many thanks to Roger Fouquet and Chris Gaskell for comments and feedback. We also acknowledge the Facultad de Ciencias Económicas y Empresariales, Universidad del Pais Vasco, Bilbao, Spain, where TO (corresponding author) was based during the data collection and analysis for the present paper.

Disclosure statement

No potential conflict of interest was reported by the authors.

Supplemental data

Supplemental data for this article can be accessed at http://dx.doi.org/10.1080/21606544.2015.1100560.

Notes

1. The term ‘developing’ is used by the World Bank to denote both low-income and lower middle income countries (see http://data.worldbank.org/about/country-and-lending-groups).

2. We note that the WTP scenario was presented in terms of annual payments over an indefinite period of time, whereas the World Bank estimates refer to specific financial requirements up until 2050. As adaptation efforts provide an on-going stream of annual benefits, on-going annual payments are the most appropriate payment schedule to use (Egan, Corrigan, and Dwyer 2015). Had we specified a payment time horizon of 2050, we would have had to justify why the duration of the payments did not match the duration of the benefits. It is possible that some individuals would have responded differently had we provided the information in terms of a specific end date of 2050 for payments. However, this is unlikely given that 35 years is a long-term horizon and an annual payment for 35 years is not, in all likelihood, going to be perceived to be very different from an indefinite horizon.

3. Probability (also known as ‘sample’) weights were applied using the ‘pweights’ command in Stata, which adjusts each sample observation according to its probability of being observed in the population. Age statistics for UK were obtained from the 2011 Census.

4. UK data for this question is only available from 2013. Prior to this date, the question was worded in terms of ‘warming’, as opposed to ‘climate change’. For example, the question ‘Do you think the climate is changing as a result of human activity?’ used to be phrased, ‘Do you think the world is becoming warmer as a result of human activity?’ Results between questions types are very different: in 2013, when the ‘climate change’ frame was used for the first time as a comparison with the ‘warming’ frame, results were as follows: 39% (53%) believed human activity is making the world warmer (changing the world's climate) and 16% (26%) believed the world is becoming warmer (the climate is changing) but not due to human activity. (Source: www.yougov.com.)

5. There were n = 2 values of £1250 (mid-interval of £1000–£1500), and n = 3 values of n = £625 (mid-interval of £600–£650) in the WAF subsample. Summary statistics show that these respondents have very high income levels (mean £113,000 per year, median: £125,000 per year), and that mean WTP of this subsample represents about 0.8% of the mean income of this subsample. This suggests that these high WTP values reflect valid preferences of wealthier individuals who highly value adaptation. To ascertain whether this is indeed the case, we conducted a quantile regression analysis of the overall conditional distribution at the 99.75th percentile (equivalent to all WTP values of £625 and over). Results confirm that income has a significant and positive effect on WTP as expected (coefficient 0.74, p = 0.004), and that all other coefficients also have the expected direction (although only knowledge and contribution to the individual sector programmes are significant). Finally, we confirm that truncation of the outliers has no significant effect on the direction or size of the coefficients. Hence, we conclude that these values represent valid preferences, and retain them in the analysis.

6. We also carried out selectivity-corrected regressions using Stata's selmlog function (Stata 2006), developed by Bourguignon, Fournier, and Gurgand (2007). This model is appropriate when the selection variable is multinomial, which is the case in this study (the standard approach used for binary selection variables is the well-known Heckman selection model). However, we found that that sample self-selection is not an issue in our data; hence, we do not report these results here. However, results from these selectivity-corrected regressions can be obtained from the authors upon request.

Additional information

Funding

We gratefully acknowledge funding from the EU FP7 Climate for Culture project at the London School of Economics [grant number #226973]; the Basque Ministry of Education, Universities and Research [grant number GIC07/56-IT-383-07].