This paper provides a summary and a critical survey of the methodologies and results of the literature on the economics of adaptation. We divide the literature into two broad areas of research. First, we examine the studies that analyse adaptation from a bottom-up perspective. Second, we introduce the studies that examine adaptation using a top-down approach. The first group of studies investigates cost and benefits of adaptation at the sectoral, regional and global level. The second group includes theoretical literature on the relationship between mitigation and adaptation as well as emerging insights from some global Integrated Assessment Models (IAMs), which have recently been extended to include adaptation as an alternative and complementary policy option to mitigation.
This latter development has raised issues that represent new challenges for the research community. In particular, understanding how to integrate the vast amount of information provided by the bottom-up literature on climate change impacts and adaptation into global models is paramount. Another challenge is to improve the sectoral and regional coverage of information on adaptation costs and benefits. Currently, much of the information is limited to specific sectors and drawn primarily from developed country contexts. In addition, uncertainty and irreversibility are very marginally tackled by adaptation studies. Finally, the role of adaptation in international climate change negotiations, which is presently growing in importance, remains largely unexplored.