Guidance

Executive summary: accounting for the effects of climate change guidance

Updated 8 April 2025

Purpose of the guidance

This supplementary guidance to HM Treasury’s Green Book helps analysts and policymakers ensure that policies, programmes, and projects are resilient to climate change. It builds on the conventional Green Book appraisal methodology to account for climate effects, supports the identification of climate risks, and aids in designing and appraising adaptation measures.

Importance of considering climate change

The UK and global climate has already warmed by 1.3°C above preindustrial levels (Met Office 2024). Further warming until at least 2040 is now largely unavoidable, regardless of present-day emissions cuts (Watkiss 2023). This means the UK must adapt to the effects of climate change over the coming decades.

Many policies, programmes and projects will be directly or indirectly affected by a changing climate (reflected in, amongst other things, their effectiveness and costs). The Climate Change Committee advises policymakers to plan for 2°C and assess the risks for 4°C of global warming by 2100 (CCC 2021). Incorporating resilience into the policy at an early stage can positively impact on value-for-money and policy delivery. Additionally, climate-resilient policies can deliver economic, social, and environmental co-benefits beyond avoided losses from climate change (Brandon et al 2022).

Determining if your policy is in-scope of the guidance

A proportionate approach to climate risk appraisal is essential. Considering climate hazards such as extreme weather events, high temperatures, and sea-level rise, answer the following screening questions:

1. Could climate change affect the success of your policy?
2. Could your policy increase vulnerability to climate change?
3. Could your policy increase resilience to climate change? 

If you answer ‘yes’ to any of these questions, follow the rest of the guidance. If you answer ‘no’ to all three questions, continue with the conventional Green Book approach.

For example, a public investment programme involving physical assets (for example, buildings or infrastructure) would be vulnerable to climate hazards and in-scope of the guidance. By contrast, a regulatory policy not directly involving people or assets vulnerable to climate change (for example, digital market regulation) would likely fall out-of-scope.

How to conduct climate resilient appraisal

This guidance builds on the Green Book approach to explicitly account for climate change, ensuring decisions are resilient to future risks. The process includes 3 key stages:

1. Assessing risks and developing resilient policy options

As part of the policy longlisting process, you should undertake a climate risk assessment to identify which climate impacts are most likely to affect your policy and the severity of these risks. This climate risk assessment should then feed into the policy drafting process, drawing on previous examples of adaptation and the principles of good adaptation policy.

 1.1 Climate risk assessment (CRA)

Identify potential climate risks that could impact the delivery of policy objectives. Follow the 3 steps of CRA:

1. Determine the appropriate climate scenario. Policies with a lifetime up to 2040 should assess risks using a 2°C warming scenario. Policies beyond 2040 should assess risks for 2°C and 4°C. The 2°C and 4°C warming scenarios are broadly consistent with representative concentration pathways (RCP) RCP2.6 and RCP6.0 (Watkiss and Betts 2021).

2. Identify the relevant climate risks. Scope out what risks are most likely to impact on your policy objectives. Draw on the list of 61 climate risks and opportunities set out in the technical report of the Third Climate Change Risk Assessment (CCRA3) published in 2022.

3. Evaluate climate risks. Determine the severity of these risks to your policy area, drawing on the Hazard-Exposure-Vulnerability (IPCC 2018). Utilise climate impact data from the Climate Risk Indicator explorer to estimate climate impacts over time and across warming scenarios. Physical climate impact information should be supplemented with economic data from the Monetary Valuation Report for CCRA3.  

For more information on climate risk assessment, consult Section 3.1 of the full guidance.

 1.2 Drafting resilient policy options

Develop policy options that include adaptation measures that reduce the costs of climate change. Follow the following process when drafting adaptation policies:

1. Identify the rationale for adaptation. If increasing climate resilience is one of the objectives of your policy, consider the market failures that require government intervention. In other cases, consider how climate resilience can support your policy objectives (for example, increased cost-effectiveness or improved policy delivery).

2. Apply the principles of good adaptation. The principles of good adaptation are defined by the Climate Change Committee in the 2021 Independent Assessment of UK Climate Risk. This list of high-level principles provides useful information on how best to design climate-resilient policies.

3. Use examples of adaptation policies to draft a longlist. Draw on existing examples of climate-resilient policies, such as the Third National Adaptation Plan (NAP3) and OpenCLIM’s UK Adaptation Inventory. Consider different adaptation strategies, such as Nature-based-Solutions.

4. Select a shortlist with at least one resilient option: incorporate climate risk considerations into critical success factors and filter the longlist into a shortlist with at least one resilient option. This resilient option should either be a ‘higher ambition’ or ‘intermediate option’.

For more information on drafting resilient policy options, consult Section 3.2 of the full guidance.

2. Appraising costs and benefits with climate change

2.1 Include climate in the baseline

As part of the shortlist appraisal process, include a scenario consistent with 2°C of warming by 2100 in the baseline. This ensures that the costs and benefits of the shortlisted policy options reflect the future climate. Consider:

• analyse the costs and benefits of the shortlisted options, incorporating climate change impacts, drawing on Green Book techniques such as expected value calculations and standardised values
• appraisal should draw on evidence from the climate risk assessment and the economic data in the Monetary Valuation Report for CCRA3
• appraise the benefits of adaptation options using the conceptual framework of the Triple Dividend of Resilience (Brandon 2022)
• if the impact of climate change on costs and benefits cannot be quantified, present these effects qualitatively

For more information on valuing costs and benefits with climate change, consult Section 4.1 of the full guidance.

2.2 Manage climate uncertainty

There is significant uncertainty around the path of future climate change in the second half of the century. Analysts should manage uncertainty as much as possible using the following guidance:

• for long-lived policies (that is, beyond 2040), the preferred option, or all shortlisted options if resources allow, should be reappraised under a 4°C by 2100 warming scenario the impact of this sensitivity test on value-for-money should be displayed prominently to support decision-makers in selecting an option suited to their risk appetite
• where feasible, use real-option-analysis to highlight the value of policy options that address uncertainty by adapting over time
• if uncertain impacts cannot be quantified, present it qualitatively
• for more information on managing climate uncertainty, consult Section 4.2 of the full guidance

3. Monitoring and evaluation for flexible adaptation policy

Monitoring and evaluation (M&E) are crucial for climate-resilient policy due to uncertainty around future climate impacts. Consider the following suggestions in relation to adaptation M&E:

• develop a theory of change to demonstrate the logic of adaptation policy
• where feasible, use an adaptive pathways approach to plan, prioritise, and sequence investments in adaptation options in response to climate indicators crossing certain thresholds
• monitor adaptation indicators to assess whether the resilience of a policy is keeping pace with the changing climate
• for more information on monitoring and evaluation for flexible adaptive policy, consult Chapter 5 of the full guidance

Checklist for analysts

Policies with lifetimes up to 2040

Ensure that you:

• assess whether climate change risk is pertinent to the policy
• complete a climate risk assessment for the policy
• generate policy options that are resilient to climate change
• evaluate the costs and benefits of each shortlisted policy option using a 2°C climate change scenario in the baseline
• include a narrative summarising any unquantified costs and benefits related to climate change and resilience
• develop a monitoring and evaluation plan to enable flexible adaptation to climate change

Policies with lifetimes beyond 2040

Ensure that you:

• follow all steps outlined for policies with lifetimes up to 2040
• mitigate uncertainty by conducting a climate sensitivity test using a 4°C warming scenario, or alternatively using real options analysis to account for impacts of different warming scenarios

Further Information

If you need additional guidance on when and how to conduct climate-resilient appraisal, download the full guidance in PDF form.

Annexes of the full guidance include:

1. Annex A: table of 61 climate risks and opportunities by sector and present-day risk.
2. Annex B: 2 illustrative case studies of how to apply the guidance to policy.
3. Annex C: a summary table of the impacts of climate change at 2°C and 4°C.
4. Annex D: further resources to support the application of the guidance.