This paper focuses on coastal protection against SLR. This is a typical case requiring public interventions to coordinate huge investments addressed to build protective infrastructure that will become a quasi-public good. To address properly this issue the ICES CGE model has been enhanced with a more detailed description of the public sector, the main actor in charge of raising and channelling the investments necessary to build and maintain sea barriers. In addition, a specific adaptation module has been built in to accommodate the required adaptation investment flows and expenditures. To provide a range of results taking into account uncertainty in climate projections we use the output of the DIVA model for two RCPs (2.6 and 8.5) with projections coming from two GCMs (NorESM and MIROC-ESM).

In a scenario where coastal protection is not enhanced, almost all world regions suffer a GDP loss with the exception of South Korea. The most damaged countries are in Asia, with losses between 3% and 5% of GDP in 2050, while EU regions would experiment moderate GDP losses lower than 1% in 2050. When coastal protection takes place, the highest GDP gains compared to the case of no protection are observed mostly in developing countries  and where SLR impacts are markedly high and adaptation expenditures particularly effective(i.e. South Asia, China, East Asia). In the remaining regions (especially in the EU) GDP gains are also experienced, but are lower.

The beneficial effect of adaptation on GDP is the result of two mechanisms: the avoided direct impacts (loss of labour productivity, land and capital). and the public deficit effect. This means that when adaptation reduces GDP losses, it also triggers a tax interaction effect which produces higher tax revenues. The government borrows less from households savings which allows for an increased capital accumulation in the long run.

This paper is co-authored by Francesco Bosello, Elisa Delpiazzo, and Parrado.
The research leading to these results has received funding from the European Union’s Seventh Framework Programme FP7-ENC-2013-two-stage under REA grant agreement n° 603906, project ECONADAPT – Economics of climate change adaptation in Europe.


This seminar has been jointly organized by FEEM and CMCC.