Top Down and Bottom-up Approaches to Climate Change Adaptation in Bulgaria

Bulgaria is likely to face serious impediments to economic growth till 2050; demographic slowdown and barriers to economic diversification are the most important among them. Climate change will add to these challenges. The analysis considers two climate change scenarios, contrasting a climate sensitive-scenario (a 2°C warmer world) and a carbon intensive-scenario (a 4°C warmer world). Regarding the overall economy, it is important to highlight the welfare impacts of climate change. Welfare losses by 2050 range from 1 to 3.5 percent of GDP, from the most optimistic scenario to the most pessimistic one. Second, climate change coupled with sub-optimal economic policies leads to further welfare losses, linked to economic inefficiency, but those are one order of magnitude lower than losses from direct impacts. Third, the impact of climate change on the terms of trade translates into welfare gains, of about the same magnitude (in absolute value) as the welfare losses linked to efficiency. As a result, terms of trade welfare gains can mitigate welfare losses linked to economic inefficiency but cannot outweigh the much larger welfare losses linked to the direct impacts of climate change. Regarding agriculture sector, based on this study’s findings, the effect of temperature rise on crop yields in Bulgaria, can be considered negative. NPVs are high, clearly indicating that the benefits are far more significant than the costs incurred. The NPV calculation shows that investments in adaptation measures are economically efficient. The annual cash flow expressed in present value will reach its maximum between 2027 and 2030, meaning that investment in agriculture through implementation of adaptation measures (including improved irrigation and soil quality, shift in cropping seasons, climate resistant crops) will have a positive impact on the sector.