Economic Justification for Action Now in Rhode Island

IEc

INDUSTRIAL ECONOMICS, INCORPORATED

Economic Justification for Action Now in Rhode Island

James NeumannPrincipal

Baird Sea Grant Science Symposium

Newport, RI

December 2014


Overview and main messages

• There are useful lessons from new efforts to explore economic implications of adaptation to coastal.

• New greenhouse gas reduction actions will reduce the economic impact of sea-level rise and storm surge threats, but you’ll still need to adapt.

• Adaptation has been shown to be cost-effective in many contexts – but you will need to start planning (and acting) now if you want the best “bang for the buck.”

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• Convening Lead Authors

• Susi Moser (Susanne Moser Research & Consulting and Stanford University

• Margaret Davidson (NOAA)• Lead authors

• Paul Kirshen (UNH)• Peter Mulvaney (Green Lead Advisors) • Jim Murley (South Florida Regional Planning Council) • Jim Neumann (Industrial Economics, Inc.)• Laura Petes (NOAA)• Denise Reed (The Water Institute of the Gulf)

Chapter 25:Coastal zone, development and

ecosystems

http://nca2014.globalchange.gov/report/regions/coasts


Economic Disruption

Nationally important assets, such as ports, tourism, and fishing sites, in already-vulnerable coastal locations, are increasingly exposed to sea level rise and related hazards. This threatens to disrupt economic activity within coastal areas and the regions they serve and results in significant costs from protecting or moving these assets.


Coast-to-Inland Economic Connections


Coast-to-Inland Economic Connections: Rhode Island 2007


Coast-to-Inland Economic Connections: Rhode Island 2040


How costs are reduced by GHG mitigation policy

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Economic implications for the US of adapting (or not)

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Adaptation Option Scenario

Discounted Cost (3% DR, billion 2005$, 2015 base year)

Full Cost-Effective Adaptation

Reference (BAU) $690

Mitigation Policy 3.7 $669

Benefits $21 Benefits (percent change) 3.0%

No Adaptationor Protection

Reference (BAU) $4,250

Mitigation Policy 3.7 $4,024

Benefits $226 Benefits (percent change) 5.3%


Cumulative benefits of mitigation:economically efficient adaptation vs. no adaptation

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Area at risk of SLR and storm surge – Tampa area

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With Rhode Island’s new mapping resources, this type of analysis can be easily conducted locally.


What if Tampa adapts to these threats?

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Vulnerable assets in Rhode Island

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Vulnerable assets in Rhode Island

• Property (residential, commercial, industrial, institutional)

• Infrastructure (energy, transport, ports, bridges, sewerage/drainage, other utilities)

• Secondary/indirect effects (e.g., business interruption, power outages, electric grid failure, transport infrastructure failures)

• Recreation resources

• Ecological resources (e.g., wetlands, fisheries)

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Adaptation response to SLR under reference scenario by 2100

Areas at risk of SLR under reference scenario by 2100


Providence

Kent

Washington

Bristol

Newport

Cumulative Damages under Reference Scenario (Undiscounted, Million 2005$)


Risky Business Report

• Risk Management Solutions (RMS) analysis examined what is at risk, with no adaptation

• IEc analysis examined adaptation options using four scenarios:

1. No defensive investments (no adaptation)2. Individual property owner action (e.g., elevation)3. Property owner action plus beach nourishment4. Property owner action, beach nourishment, and shoreline

armoring

• Key Finding 1: Costs increase as the options available to adapt decrease (highest cost for scenario 1, lowest for scenario 4)

• Key Finding 2: The no adaptation option is four to six times higher cost than the full adaptation option

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INDUSTRIAL ECONOMICS, INCORPORATED 18



Important Results:1. No strategies are cost-

effective under current climate

2. All strategies cost-effective with mid-level SLR projection, particularly shoreline minimization (left map) and flood-proofing (right map)

Source: Aerts et al., Science, 344: 473-475. 2 May 2014


Take home messages

• Don’t assume you can adapt to all climate change – there will be “residual risks”

• The US is highly vulnerable, in economic terms, to coastal threats

• Mitigating GHGs will help reduce the threat – but it will take time to have a significant impact

• Adaptation in the coastal zone, in general, is a cost effective option, particularly in densely populated areas

• The sooner you start, the better off you’ll be – the first step for Rhode Island is to tailor some of the existing work to support near-term decision-making

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Thank You


How did we think about economics and taking adaptation action in the IPCC report?


Potential for High Adaptive Capacity: Hurricane Ike, Gilchrist, TX


Potential for High Adaptive Capacity: Hurricane Ike, Gilchrist, TX


What does it look like today?

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Modeling Response to SLR

Q1: Is cell

elevation lessthan relative

SL in thatyear?

Q2: Is cell

land andstructure value

more than protectioncost (capitalplus O&M)?

Q3: Are any

neighborsthreatened?

Q4: Is cell

plus neighbor cells land and structure

value more than cell plus neighbor

protectioncost?

Yes Yes Yes Yes

Not threatened

No

AbandonCost = land +structure value

No

ElevateCost =

elevation costfor structureand some

surrounding land

NoNo

Armor/NourishCost to armor =

capital + annual O&M

Cost to nourish = incremental sand

cost, with newsand each decade


Costs of efficient adaptations to SLR and storm surge

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Centimeters SLR for Providence and Newport Tide Gauges (Kopp et al., 2014)

Providence Newport

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Economic Justification for Action Now in Rhode Island

Economy & Finance