Part of a series on the report “Advancing adaptation: Mapping costs from cooling to coastal defenses” by the McKinsey Global Institute.
Executive Summary
Adaptation is not new, but the price tag of protecting people and economies in a warming world is. Using a practical toolkit of twenty widely deployed measures such as cooling, irrigation, and coastal defenses, the report frames today’s estimated $190 billion per year in adaptation spending as protecting about 1.2 billion people to developed-economy standards, while extending that benchmark to the roughly 4.1 billion people living in exposed places would cost about $540 billion per year, revealing a large resiliency gap; looking ahead, it treats warming levels as planning states (about 1.5°C around 2030 and 2°C around 2050) because many investments take years to deliver and last decades, estimating that at 2°C maintaining current protection could cost about 2.5 times today’s spending, while reaching developed-economy standards could cost about 6.2 times today’s spending (roughly $1.2 trillion per year), with more than half driven by air conditioning and irrigation—linking adaptation directly to power systems, water governance, and affordability; even if benefits can outweigh costs by about seven to one, real-world constraints—capacity to pay, coordination, delivery capability, and political will—determine what is implemented, meaning leaders should use the numbers as a directional map to prioritize hazards, measures, and financing mechanisms that turn cost-effective protection into absolute protection.
Adaptation Is Ancient, but the Price Tag Is New
Adaptation is often spoken about as if it were a new discipline. Still, the core idea is older than modern infrastructure: societies continually adjust where they live, how they build, and how they operate in response to environmental stress. The report’s “at a glance” message begins from that premise and then narrows to a practical question: if extreme weather and climate hazards intensify and shift as warming rises, how much does it cost to protect people and economic activity, and how quickly might that bill grow? The report approaches the question using a deliberately “actionable” frame—20 cross-cutting measures already used in many places, such as air conditioning, irrigation, and coastal defenses. That emphasis is not accidental. A global estimate is only meaningful if it is grounded in things that can plausibly be built, bought, operated, and maintained across very different contexts, rather than relying on bespoke solutions that cannot be compared across regions.
Today’s Spend, Tomorrow’s Gap
The first headline number in the outline is today’s spending: about $190 billion per year is currently being spent on defenses against extreme weather, and that spending is estimated to protect roughly 1.2 billion people to protection standards typically associated with developed economies. Those standards matter because “exposure” to a hazard is not a binary fact; it depends on the intensity and probability thresholds deemed unacceptable, and on the level of protection society chooses to purchase. Using a developed-economy benchmark creates a consistent yardstick, but it also highlights inequality: when applied globally, the scale of “unmet protection” becomes apparent. In the outline, protecting everyone living in exposed places to the developed-economy benchmark—roughly 4.1 billion people—would cost about $540 billion per year. The difference between what is spent now and what it would cost to reach that benchmark is labeled the resiliency gap.
Warming Levels as Planning Deadlines
The next “at a glance” claim links adaptation costs to warming trajectories and planning horizons. The outline frames a “current trajectory” in which average warming reaches about 1.5°C around 2030 and about 2°C around 2050. Whether a specific year is earlier or later, the underlying point for decision-makers is lead time. Many adaptation measures, from flood defenses to water-system upgrades to settlement planning, take years to design, permit, finance, and construct. If the hazard regime changes during the design lifetime of assets, “today’s” standards can embed underprotection into infrastructure that may remain in service for decades. The report therefore treats warming levels as planning states and asks what protection would cost at those states.
Two Futures: Hold the Line or Raise the Standard
That framing leads to the most prominent “future cost” contrast in the outline: maintaining current protection levels versus raising protection to developed-economy standards. The outline states that at 2°C, maintaining current protection levels could require spending about 2.5 times today’s level. In other words, even if societies do not seek a higher benchmark, they may need to pay more to keep pace with increased exposure and hazard intensity. The more ambitious benchmark—protecting to developed-economy standards—could cost about 6.2 times today’s spending, or roughly $1.2 trillion per year, by around 2050. This multiplier framing is helpful because it turns a large number into a comparative scale: the global adaptation bill is not just “big,” it is meaningfully larger than today’s spending, and the gap between “maintain” and “raise standards” is itself enormous.
The Cost Stack: Cooling and Irrigation Dominate
A second insight embedded in the “at a glance” section is that the composition of costs matters as much as the total. The outline notes that at 2°C, more than half of total costs under the developed-economy benchmark are associated with air conditioning and irrigation. That concentration points to two dominant drivers: heat and water stress in agriculture. It also implies that adaptation is not only a story about significant public works—sea walls and levees—but also about distributed technologies, energy systems, and household and firm choices. Cooling requires access to electricity, grid reliability, and affordability; irrigation requires water availability, energy for pumping, and governance that prevents short-term fixes from causing long-term depletion. When the largest cost categories fall within these domains, adaptation policy becomes inseparable from power-system planning, water allocation, and equity programs that ensure protection is not a luxury good.
Good on Paper, Hard in Practice
The “at a glance” summary also emphasizes that adaptation is attractive on paper but challenging in practice. The outline states that benefits at 2°C are estimated to outweigh costs by about seven to one, implying that the avoided damages and losses could be several times larger than the spending required. However, the same summary immediately qualifies that attractive benefit-cost ratios do not guarantee adoption. Real-world constraints shape uptake: who has the capacity to pay, how benefits and costs are distributed, whether there is institutional capability to plan and deliver projects, and whether political systems can sustain multi-year programs whose payoff is the absence of future losses. In addition, the report’s framing implies that adaptation has limits; even with spending, residual risk remains, and some hazards may outpace protection in certain places or create trade-offs when protective measures redirect risk elsewhere.
A Practical Map for Leaders
Taken together, the “at a glance” section is a compact argument with three moving parts. First, it establishes that adaptation can be evaluated using an implementable toolkit of measures and a consistent benchmark. Second, it quantifies the gap between current protection and a benchmark, and shows how that gap grows with warming. Third, it insists that the adaptation challenge is not purely technical or economic; it is institutional and distributional. For leaders, that means the “right” response is not simply to memorize the dollar figures. The practical response is to treat the figures as a directional map: identify which hazards are driving exposure in your geography, which measures dominate costs in your sector, and which financing and governance mechanisms will determine whether cost-effective protection becomes absolute protection.
More in the next post on the report “Advancing adaptation: Mapping costs from cooling to coastal defenses” by the McKinsey Global Institute…
(Source: McKinsey Global Institute. (2025, December 11). Advancing adaptation: Mapping costs from cooling to coastal defenses. McKinsey & Company.)
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