The U.S. Department of the Interior is a major land-management agency of the federal government.  Many of the lands and resources managed by Interior are subject to impacts of climate change.  A challenge faced by Interior is how to prioritize among a large number of potential climate change adaptation projects, given that resources are limited and that the scope and magnitude of climate change in any particular location is uncertain.  In setting priorities, land managers must account for the severity of potential climate impacts; uncertainty; the values of the systems, species, or populations; and the costs associated with any particular adaption measure or set of measures.

In this paper we discuss the role of economic analysis and adaptive management in responding to climate change, from the perspective of the Department of the Interior’s (DOI) land management responsibilities. The paper frames the problem of land management in economic terms, and presents a review of the literature, including a typology of adaptation, a discussion of environmental markets and pricing, and the role of economics in evaluating adaptation investments. We provide examples of adaptation issues pertinent to Interior’s mandates, and present a simple model of the tradeoffs facing a land manager considering habitat needs for endangered species in the context of climate change.