Forecasts and Adaptation

For many environmental problems, economics adaptation will likely be the primary means by which potential damages are avoided. How and by how much humans adapt to environmental risks, therefore, is a question of paramount importance. This paper uses a novel dataset documenting the introduction of forecasts of an important, global driver of climate variation—El Nino/Southern Oscillation (ENSO)—to derive the first well identified estimates of total adaptation in a climate exposed industry. The primary results indicate that for the setting under consideration, risks from ENSO events can be almost entirely mitigated given 3 months of advance warning. This adaptation comes from a combination of daily and annual actions. In sum, the results point both to the ability for individuals in some settings to mitigate their own environmental risks given high quality information.