This paper uses spatially-explicit analyses of climate change effects on selected key sectors of Ethiopia’s economy to estimate both sector-wise and economy-wide estimates of impacts and adaptation costs. Using four IPCC-vetted Global Circulation Models (GCMs) to bracket the uncertainty surrounding future climate outcomes, the paper finds that by 2050 climate change could cause GDP to be 8–10 percent smaller than under a no-climate change baseline; it could induce a two-fold increase in variability of growth in agriculture; and it would affect more severely the poor and certain parts of the country. The paper also finds that adaptation to climate change might cost an annual average of USD 0.8–2.8 billion; and an additional USD 1.2 to 5.8 billion if one takes into account residual damages which may not be addressed by adapting existing development plans. The paper also provides sector-specific insights on impacts and adaptation options in agriculture, road transport, and hydropower. In particular, rapid development of Ethiopia’s hydro-potential, upgrading of the road design standards, and gradual diversification of the economy away from the more climate vulnerable sectors are likely to be important elements of any climate-resilient development strategy.

© 2013 International Food Policy Research Institute