Kyle Poyar
Honors Thesis Proposal
September 30, 2009
Beyond No Regrets: Assessing the Economic Efficiency of Policy Strategies for Adapting the Urban Built Environment to Climate Change
Motivation for Research:
Due to the magnitude of potential damages associated with climate change, a number of researchers (e.g. Wu et al, 2009; Jacob and Showalter, 2007; Sparks, 2009; Hallegatte, 2009; Pielke, 1998) have recommended that state and local governments take precautionary action to reduce exposure to negative climate impacts, lessen the vulnerability of populations that are exposed to these impacts, and increase resiliency to bounce back from unavoidable or unanticipated impacts. A number of different criteria have been put forward to help decision-makers prioritize policy instruments for planned, anticipatory adaptation (see Table 1, adapted from Poyar and Beller-Simms, unpublished). While some criteria are particular to climate adaptation (e.g. mitigation co-benefit and generation of autonomous adaptation), most are applicable across a wide range of policy domains (e.g. economic efficiency, equity, legitimacy).
Table 1 – Evaluation Criteria for Climate Adaptation Policy
| Evaluation Criterion | Definition | Example(s) Meeting Given Criterion | Corresponding Author(s) |
| Economic efficiency | Identification of fiscal benefits that exceed costs | Construct storm surge barriers in a vulnerable coastal city | Adger et al (2005), Sparks (2008) |
| Equity | Determination of fairness of gain and loss distribution across the community | Locate cooling/relief centers nearby those most vulnerable to extreme heat events | Adger et al (2005) |
| Irreversible impact | Detection of potentially irreparable or catastrophic impacts, such as loss of life | Incorporate climate change forecasts in long-term planning and disaster preparedness | Smith and Lenhart (1996) |
| Legitimacy | Acceptability of decisions and decision-making to affected parties | Varies by community. For instance, water rationing in a community may be legitimate only during a severe drought | Adger et al (2005) |
| Mitigation co-benefit | Simultaneous advancement of climate change mitigation and adaptation objectives | Expand urban tree planting; promote water conserving technology | Hallegatte (2009), CCAP (2009) |
| No regrets | Provision of substantive benefits even if no climate change occurs | Limit development in areas already prone to flooding | Hallegatte (2009), Pielke (1998) |
| Reduced decision
Horizon |
Diminution of the lifetime of investments potentially vulnerable to climate change | Build less costly homes in areas vulnerable to projected sea-level rise | Hallegatte (2009); Fankhauser et al (1999) |
| Reversibility (policy flexibility) | Ability to update or amend to fit changing conditions and new information | Restrictive urban planning in areas vulnerable to projected sea-level rise | Hallegatte (2009) |
| Robustness | Determination of acceptable performance under a wide range of plausible futures | Implement water demand management programs | Lembert and Schlesinger (2000) |
| Safety margin | Identification of small marginal cost to account for climate change in long-lived investment | Increase capacity of new drainage infrastructure | Hallegatte (2009) |
| Autonomous adaptation generation | Provision of incentives for private actors to reduce their vulnerability to climate change | Notify coastal homeowners of potential flood risks due to sea-level rise | Fankhauser et al (1999) |
A number of studies have used these evaluation criteria as markers to assess the relative attractiveness of specific climate adaptation policy instruments (see Table 1). Much of this literature is unsatisfying; however, as the various studies can only conclusively stand behind policy instruments that are conservative, low-risk, and low cost. In fact, in a survey of the state of climate adaptation in the United States, Moser (2009) contends that “adaptation plans most commonly use climate change as justification to do (or pursue) no-regrets (or at most low-regrets) policies that officials believe should be implemented independent of whether or not the climate is changing.” Such policies include better preparing for extreme weather disasters, promoting green development, and expanding green infrastructure in the city.
An important reason why decision-makers in the United States have yet to begin meaningfully adapting to climate change is because little has been written on the direct economic impacts of climate change and how those impacts compare to the cost of adapting (Sparks 2008). As Pittock et al. (2001) lament, “without [quantitative] estimates, engineers and planners will have to delay decisions or take a gamble.” There are signs that this is beginning to change in North America1. The City of Chicago, for instance, commissioned a detailed corporate risk analysis of the impacts of climate change on its operations, which identified roughly $2.5 billion in direct costs assuming that adaptation measures are not undertaken (Oliver Wyman Group 2008). The Chicago study did not go so far, however, as to assess whether (and what kinds of) adaptation strategies should be undertaken in the present to reduce these fiscal impacts. Meanwhile, Sparks (2008) calculated the costs and benefits of implementing coastal zoning restrictions in a rural Canadian watershed over a 25-year planning horizon, concluding that the proposal had a $150 million net present value compared to doing nothing. Finally, the Water Utility Climate Alliance commissioned a study that is currently under peer review (Means III et al, unpublished), which addresses how to use decision support methods, including financial planning tools, to incorporate climate change projections in medium and long-range capital planning for the U.S. water utility sector.
In fact, financial planning tools, such as those employed in Sparks (2008) and Oliver Wyman Group (2008), are extremely attractive in the context of assessing the efficiency of climate change adaptation. Unlike the more qualitative policy evaluation criteria outlined in Table 1, financial tools are highly-developed and well-respected across a range of sectors and industries to help make decisions given competing resource demands and uncertain future cash flows (Welch 2009). These sophisticated methods can evaluate and prioritize a range of potential projects under complicating factors such as high uncertainty in future outcomes, varying degrees of risk aversion, long payback periods, and potentially catastrophic events.
Research Questions:
My overall research question is the following, “Is it economically efficient to begin adapting the urban built environment to climate change right now?” I am planning on focusing on two cities, Chicago, IL (which has a great deal of publicly available climate information) and Providence, RI (which has far less available climate information). Since policy instruments that are ‘no-regrets’ are already being implemented today and are generally assumed to be economically efficient (Poyar and Beller-Simms, unpublished), I will focus my study on more costly or more controversial policy instruments. These instruments will likely include one or several of the following: (a) restrictive land use planning, (b) improved building standards, (c) distribution of air conditioners to low-income residents, (d) more stringent insurance schemes for coastal residents, (e) climate proofing of old critical public infrastructure (e.g. wastewater treatment facilities), (f) relocating critical public infrastructure further inland.
Data Collection and Methods:
I will draw climate impacts from regional and national climate impact assessments, including Hayhoe and Wuebbles (2008), Hayhoe et al (2009) and Karl et al (2009). To quantify the economic cost of climate impacts, I will look for reasonable historical analogues when appropriate (as applied in Sparks, 2008) or perform a meta-analysis of the existing literature on expected climate change damages. For each relevant climate impact, I will apply the Risk = Probability x Impact framework to calculate the expected damages from inaction accrued over a defined period of time (the expected lifetime of the given policy instrument). I suspect that finding probability data will be particularly difficult, and so I will apply either expert elicitation (recommended to be a standard part of IPCC assessments by Moss and Schneider, 2000) to collect this information or utilize a scenario approach in calculating risk. Once I have the climate risk calculation, I will aggregate the expected reduction of damages (discounted by the amount of time in the future that these savings would occur) from different adaptation policy instruments. Finally, I will use Net Present Value to compare the initial costs of adaptation to expected discounted savings from adaptation.
Example: Distribute air conditioners to all Chicago residents2
Example: Relocate individuals in Providence’s 1-in-100-year floodplain
Anticipated Results and Their Significance:
My hypothesis is that several adaptation policy instruments that have not been given serious attention in U.S. cities today would actually be good public policy from the perspective of economic efficiency. I suspect, however, that the uncertainty of the climate science along with the long time horizon under consideration will show up in the form of wide ranging estimates for the costs of climate change impacts (and therefore the net present value of adaptation options). Practically speaking, my results will be important for helping the local community better understand and begin preparing for the impacts of climate change. Academically, this research will provide a framework for how to calculate the efficiency of climate change adaptation strategies in the urban built environment. It will also help reflect the sophistication of current scientific understanding of how climate change will impact particular communities, which will be important for informing the future research priorities of climate scientists and U.S. federal officials.
Selected Sources:
Anderson, R., 2007. Who Pays for Water Pipes, Pumps and Treatment Works? Local Government Expenditures on Sewer and Water – 1991 to 2005. United States Conference of Mayors, Mayors Water Council. Accessible at http://www.usmayors.org/urbanwater/
Betsill, M.M., 2001. Mitigating Climate Change in US Cities: opportunities and obstacles. Local Environment, 6(4), 393-406.
Betsill, M., Bulkeley, H., 2007. Looking Back and Thinking Ahead: A Decade of Cities and Climate Change Research. Local Environment, 12(5), 447-456.
Cash, D.W., Moser, S.C., 2000. Linking global and local scales: designing dynamic assessment and management processes. Global Environmental Change, 10, 109-120.
Center for Clean Air Policy (CCAP), 2009. Ask the Climate Question: Adapting to Climate Change Impacts in Urban Regions. A Report by the Center for Clean Air Policy Urban Leaders Adaptation Initiative.
City of Chicago, 2008. Chicago Climate Action Plan.
Cohen, S., 2009. Adapting to Climate Change in New York City. New York Observer (2-27-2009). Accessed 9-July 2009 at http://www.observer.com/2009/adapting-climate-change-new-york-city
Demeritt, "The Construction of Global Warming and the Politics of Science", in Annals of the Association of American Geographers
Dessai, S., Hulme, M., 2004. Does climate adaptation policy need probabilities? Climate Policy, 4, 107-128.
Environment Canada, 1997. The Canada country study: climate impacts and adaptation, national summary for policymakers. Environment Canada, Ottawa.
Fankhauser, S., Smith, J.B., Tol, R.S.J., 1999. Weathering climate change: some simple rules to guide adaptation decisions. Ecological Economics, 30(1), 67-78.
Hallegatte, S., 2009. Strategies to adapt to an uncertain climate change. Global Environmental Change, 19, 240-247.
Hayhoe, K., K. Cherkauer, N. Schlegal, J. VanDorn, S. Vavrus, and D. Wuebbles, 2009: Regional climate change projections for Chicago and the Great Lakes. Journal of Great Lakes Research, in press.
Hayhoe, K., Wuebbles, D., 2008. Climate Change and Chicago: Projections and Potential Impacts. Report for the Chicago Climate Change Task Force.
Houston-Galveston Area Council, 2008. Foresight Panel on Environmental Effects Report.
Jacob, J.J., Showalter, S., 2007. The Resilient Coast: Policy frameworks for adapting the built environment to climate change and growth in coastal areas of the U.S. Gulf of Mexico. Texas Sea Grant Program, National Oceanic and Atmospheric Administration.
Karl, T., Melillo, J., Peterson, T. (Eds.), 2009. Global Climate Change Impacts in the United States. A Report by the U.S. Global Change Research Program. New York: Cambridge University Press.
King County, 2007. King County Climate Plan. Accessible at http://www.metrokc.gov/exec/news/2007/pdf/cliamteplan.pdf
Kleinberg, E., 2005. When Chicago Baked: Unheeded lessons from another great urban catastrophe. Slate Magazine (9-2-2005). Accessed 16-July 2009 at http://www.slate.com/id/2125572/
Kousky, C., Schneider, S.S., 2003. Global climate policy: will cities lead the way? Climate Policy, 3(4), 359-372.
Lambright, W.H., Changnon, S.A., Harvey, L.D.D., 1996. Urban Reactions to the Global Warming Issue: Agenda Setting in Toronto and Chicago. Climatic Change, 34, 463-478.
Lembert, R.J., Schlesinger, M.E., 2000. Robust Strategies for Abating Climate Change. Climatic Change, 45, 387-401.
Lempert, R., N. Nakicenovic, D. Sarewitz, M. Schlesinger, 2004. Characterizing Climate-Change Uncertainties for Decision-Makers: An Editorial Essay. Climatic Change, 65, 1-9.
Liverman, D., 2004. Who Governs, at What Scale, and at What Price? Geography, Environmental Governance, and the Commodification of Nature
Logan, J. and Molotch, H., 1987. Urban Fortunes: The Political Economy of Place.
Miami-Dade Climate Change Advisory Task Force, 2008. Second Report and Initial Recommendations.
Moser, S.C., 2009. Good Morning, America! The Explosive U.S. Awakening to the Need for Adaptation. Report for the California Energy Commission and the NOAA Coastal Services Center.
Moss, R. and Schneider, S. H.: 2000, ‘Uncertainties – Guidance Papers on the Cross Cutting Issues of the Third Assessment Report of the IPCC’, in Pachauri, R., Taniguchi, R., and Tanaka, K. (eds.), World Meteorological Organisation, Geneva, Switzerland.
Naess, L.O., G. Bang, S. Eriksen, J. Vevatne, 2005. Institutional Adaptation to Climate Change: Flood Responses at the Municipal Level in Norway. Global Environmental Change, 15(2), 125-138.
National Research Council, 2009. Informing Decisions in a Changing Climate. Panel on Strategies and Methods for Climate-Related Decision Support, Committee on the Human Dimensions of Global Change. Division of Behavioral and Social Sciences and Education. Washington, DC: The National Academies Press.
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New York City Climate Change Program (NYCCCP), 2008. Report 1: Assessment and Action Plan. New York City Department of Environmental Protection.
Nicholls, R.J., S. Hanson, C. Herweijer, N. Patmore, S. Hallegatte, J. Corfee-Morlot, J. Chateau, R. Muir-Wood, 2007. Screening Study: Ranking Port Cities with High Exposure and Vulnerability to Climate Extremes, OECD Working Paper, available at http://www.oecd.org/document/56/0,3343,en_2649_201185_39718712_1_1_1_1,00.html
Oliver Wyman Group, 2008. Corporate Risk Case Study: City of Chicago Climate Change Task Force. Report for the Chicago Climate Change Task Force.
Parry, M.L., O.F. Canziani, J.P. Palutikof, P.J. van der Linden, C.E. Hanson, (Eds.), 2007. Climate Change 2007: Impacts, Adaptation, and Vulnerability. IPCC Working Group II. Cambridge: Cambridge University Press.
Parzen, J.: Global Philanthropy Partnership, interview, June 19, 2008.
Parzen, J. ed. 2008. Chicago Area Climate Change Quick Guide for Municipalities and Other Organizations: Adapting to the Physical Impacts of Climate Change. Chicago, IL: City of Chicago.
Pew Center on Global Climate Change, 2008. Adaptation Planning – What U.S. States and Localities are Doing (2008 Update). Arlington, VA: Pew Center on Global Climate Change.
Pielke, R.A., 1998. Rethinking the role of adaptation in climate policy. Global Environmental Change, 8(2), 159-170.
Poyar, K. and Beller-Simms, N., 2009. Cities responding to climate change: an analysis of seven state and local climate adaptation planning initiatives. Policy paper prepared for NOAA.
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Walker, D.: National Oceanic and Atmospheric Administration, Climate Program Office, interview, July 30, 2009.
Welch, I., 2009. Corporate Finance: An Introduction. Boston, M.A.
Wu, S., Najjar, R., Siewert, J., 2009. Potential impacts of sea-level rise on the Mid- and Upper-Atlantic Region of the United States. Climatic Change, 95(1-2), 121-138.