Using Markets to Adapt to Climate Change

This article examines how markets can facilitate adaptation to climate change by enabling individuals, firms, and governments to respond to shifting risks through prices and incentives. Drawing on evidence from climate economics, the authors argue that well-functioning markets can promote efficient adaptation decisions—such as relocation, infrastructure investment, insurance uptake, and technological innovation—by transmitting information about climate risks. However, markets alone are insufficient when faced with public goods problems, distributional inequities, and missing or distorted price signals. The authors emphasize the importance of complementary policies that improve market functioning, protect vulnerable populations, and ensure equitable adaptation outcomes.