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The Republic of Palau, the westernmost island cluster in the Caroline Island Group, is located in the western Pacific Ocean. Palau consists of 586 coralline and volcanic islands, of which only twelve are continuously inhabited. 25 percent of Palau’s landmass lies below ten meters above sea level. Consequently, low-lying coastal areas may be threatened by sea level rise. Inundation of low-lying atolls may reduce the agricultural capacity of Palau due to soil salination. Although adaptation options have been suggested, such as the cultivation of salt-tolerant root crops and foreshore revegetation, Palau has not yet developed a formal climate change adaptation programme.

Palau’s climate is hot and humid, averaging between 74-83 degrees Fahrenheit. Palau receives approximately 150 inches of rainfall annually. Although rainfall in Palau is plentiful, increasing atmospheric temperatures and saltwater inundation as a result of climate change may threaten freshwater supplies. Palau has two seasons during the year. The wet season begins in May and peaks in September, while the dry season runs from February to April and October to December. Palau is subject to typhoons and severe storms which have caused damage to local infrastructure and fisheries. An increase in storm-frequency associated with climate change could therefore pose a significant threat to Palau in the future.

Palau is considered the most biologically rich island group within Oceania, boasting one of the largest tropical rainforests in Micronesia, mangrove forests, seagrass beds, fringing reefs, patch reefs, barrier reefs, and marine lakes. Tourism is the country's economic base and is an extremely important industry, contributing US $67 million, or 47%, of its Gross Domestic Product (GDP).  Climate change-induced damage to the environment such as coral bleaching could adversely affect this vital industry. Other economic bases include subsistence agriculture and fishing, both contributing to Palau’s GDP. Increases in ocean temperatures may alter the migratory patterns of fish populations in Palau’s waters, also adversely affecting this industry.  The government is a major employer and relies heavily on external funding.