The Economics of Climate Change Adaptation

It takes a special event to nudge me to travel from Los Angeles to NYC in early February!  Yesterday, I had the pleasure of giving the Keynote Address  at a Rudin Center Event on Urban Livability at NYU’s Wagner School.   After the event, I participated in this   video interview  .  I know that I should stick to radio but if you click on the video you will quickly get a sense of my Climatopolis book’s key themes.    Climate change is a serious challenge.   Unfortunately, world greenhouse gas emissions will continue to rise.  Are we doomed?  In Climatopolis, I present a logical vision of how urban households, firms and governments will make new investments that collectively help us to adapt to this scary challenge.

We know that “we don’t know” how climate change will impact our cities.  The anticipation of coming, ambiguous pain actually helps us to adapt.  Households have access to a host of adaptation strategies ranging from migration, to purchasing better air conditioners (Moscow).  Entrepreneurs who anticipate coming days of climate change induced suffering have strong incentives to innovate now so that they can get rich selling their “adaptation friendly” products to desperate Homer Simpsons and Rush Limbaughs (who haven’t planned ahead).    Unlike previous work, my book focuses on the “small ball” microeconomics of how we individually take actions to protect ourselves so that Mother Nature’s shocks don’t knock us out.   Urbanites will continue to thrive in our hotter future. In a future post, I will talk about developing country cities and what they will do to adapt to the real challenge of climate change.

Author: Matthew E. Kahn

Professor of Economics at UCLA.

5 thoughts on “The Economics of Climate Change Adaptation”

  1. This is an approach worthy of discussion: people and societies simply won’t get it together and change until it is too late, so let’s focus on adaptation.

    The First World/G20 will spend a few % of GDP and more in social capital to adjust and recover from the shock, surely, but I suggest that the effects of migration haven’t been fully apprehended and calculated. The % of GDP spent on that and the big hit social capital and ecosystem services will take means Matt needs an EcolEcon partner to think this through. Think about it: what country on this planet has an easy time with immigration? Two maybe?

    Last, Business As Usual means massive changes that I’m not sure Matt fully grasps (I’ve had Green Cities soon after it came out and read his blog regularly). Provided we don’t have a significant population adjustment when ecosystems become unstable and some flip, we will be spending much more time just getting water and growing food and the economy will shrink. Infra will degrade as a result and we will localize. Much re-thinking of how we order our society is in order here, and IMHO implicitly averring that adaptation will work out hunky-dory falls short of what is needed. Caveat: I have an ecological education, so I’m necessarily gloomy.

  2. What kind of “adaptation friendly” products help poor people move out of coastal cities? What kind of products help farmers relocate and find new jobs after their previously-productive farms turn to desert?

    I agree that global warming is a done deal and we all had better get ready, but I am not benign about what this will look like. The only fact that gives me any comfort is that climate change will happen slowly. Centuries, not decades, thank God.

  3. The only fact that gives me any comfort is that climate change will happen slowly. Centuries, not decades…

    That is not at all certain. I’m pretty sure no one is planning that way and instead some plans expect rapid changes in some functions/actions of the biosphere.

  4. Between the length of the time horizon and the overlay of variability imposed by the weather, I really don’t see individual investment decision-making mattering directly, without an overarching and artificial framework — some combination of carbon taxes and tradeable emission permits.

    If we are at peak oil, for example, the global economic risk is that the “natural” market economy will drive pernicious behavior at a micro-level, absent sensible over-arching frameworks. Either we will take enormous environmental risks to keep the oil-economy rolling along, accelerating the general environmental degradation, with fraking and deep-sea exploration (see Gulf of BP and eat tuna while you can), or . . . obviously there’s no “or”: that’s the choice we’ve taken. Those, who plan ahead, have decided to “cope” by accelerating collateral environmental degradation, in time to collect bonuses. As petroleum consumption declines, and throughput through the refining and distribution chain falls, that chain will be neglected, and prices, particularly of the worst grades, could plummet from time to time, accidents happen, etc.

    The prime economic problem, as always, is not to protect us from climate change, per se, but from ourselves. And, we’ve failed. Thanks for that.

  5. Joel: “The only fact that gives me any comfort is that climate change will happen slowly. Centuries, not decades… ”

    Dan Staley: “That is not at all certain. I’m pretty sure no one is planning that way and instead some plans expect rapid changes in some functions/actions of the biosphere.”

    Everything I’ve seen suggests that the models are seriously underestimating the rate (they are both scientifically conservative, and skewed by political consideraions).

    For example, glacial melting in Greenland was zeroed out in the models, because it was an unknown factor, with the least-bad estimates suggesting centuries. The past decade has shown that the glaciers there are being affected far more quickly – things are showing up within a decade.

    IIRC, the Arctic Ocean and the permafrost zone around it are melting more quickly than was predicted.

    My casual impression is that the hypothesized negative feedback loops are one by one proving to be non-significant.

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