Fiscal effects and the potential implications on economic growth of sea level rise impacts and coastal zone protection
Fiscal effects and the potential implications on economic growth of sea level rise impacts and coastal zone protection
Climate change impacts on coastal zones could be significant unless adaptation is undertaken. One particular macroeconomic dimension of sea level rise (SLR) impacts that has received no attention so far is the potential stress of SLR impacts on public budgets. Adaptation will require increased public expenditure to protect assets at risk and could put additional stress on public budgets. We analyse the macroeconomic effects of SLR adaptation and impacts on public budgets. We include fiscal indicators in a climate change impact assessment focusing on SLR impacts and adaptation costs using a computable general equilibrium model extended with a detailed description of the public sector. Coastal protection expenditure is financed issuing government bonds, meaning that coastal adaptation places an additional burden on public budgets. SLR impacts are examined using several scenarios linked to three different Representative Concentration Pathways: 2.6, 4.5, and 8.5, and two Shared Socioeconomic Pathways: SSP2 and SSP5. Future projections of direct damages of mean and extreme SLR and adaptation costs are generated by the Dynamic Interactive Vulnerability Assessment framework. Without adaptation, all regions of the world will suffer a loss and public deficits increase respect to the reference scenario. Higher deficits imply higher government borrowing from household savings reducing available resources for private investments therefore decreasing capital accumulation and growth. Adaptation benefits result from two mechanisms: (i) the avoided direct impacts, and (ii) a reduced public deficit effect. This allows for an increased capital accumulation, suggesting that support to adaptation in deficit spending might trigger positive effects on public finance sustainability.
Adaptation, Climate change, Computable general equilibrium, Public budgets, Sea level rise, Sustainability
283-302
Parrado, Ramiro
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Bosella, Francesco
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Delpiazzo, Elisa
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Hinkel, Jochen
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Lincke, Daniel
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Brown, Sally
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1 May 2020
Parrado, Ramiro
8bdfeb3f-0ce0-4efa-acc9-5ed531cedc96
Bosella, Francesco
10064ec3-5ad8-4c7d-8962-d4559ff61c72
Delpiazzo, Elisa
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Hinkel, Jochen
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Lincke, Daniel
381b1e7b-b2a0-4f0e-ac69-0a6550104003
Brown, Sally
dd3c5852-78cc-435a-9846-4f3f540f2840
Parrado, Ramiro, Bosella, Francesco, Delpiazzo, Elisa, Hinkel, Jochen, Lincke, Daniel and Brown, Sally
(2020)
Fiscal effects and the potential implications on economic growth of sea level rise impacts and coastal zone protection.
Climatic Change, 160 (2), .
(doi:10.1007/s10584-020-02664-y).
Abstract
Climate change impacts on coastal zones could be significant unless adaptation is undertaken. One particular macroeconomic dimension of sea level rise (SLR) impacts that has received no attention so far is the potential stress of SLR impacts on public budgets. Adaptation will require increased public expenditure to protect assets at risk and could put additional stress on public budgets. We analyse the macroeconomic effects of SLR adaptation and impacts on public budgets. We include fiscal indicators in a climate change impact assessment focusing on SLR impacts and adaptation costs using a computable general equilibrium model extended with a detailed description of the public sector. Coastal protection expenditure is financed issuing government bonds, meaning that coastal adaptation places an additional burden on public budgets. SLR impacts are examined using several scenarios linked to three different Representative Concentration Pathways: 2.6, 4.5, and 8.5, and two Shared Socioeconomic Pathways: SSP2 and SSP5. Future projections of direct damages of mean and extreme SLR and adaptation costs are generated by the Dynamic Interactive Vulnerability Assessment framework. Without adaptation, all regions of the world will suffer a loss and public deficits increase respect to the reference scenario. Higher deficits imply higher government borrowing from household savings reducing available resources for private investments therefore decreasing capital accumulation and growth. Adaptation benefits result from two mechanisms: (i) the avoided direct impacts, and (ii) a reduced public deficit effect. This allows for an increased capital accumulation, suggesting that support to adaptation in deficit spending might trigger positive effects on public finance sustainability.
Text
Fiscal effects and the potential implications on economic growth of sea level rise impacts and coastal zone protection
- Accepted Manuscript
More information
Accepted/In Press date: 20 January 2020
e-pub ahead of print date: 31 January 2020
Published date: 1 May 2020
Additional Information:
Funding Information:
The authors gratefully acknowledge funding from the European Union under contract number EVK2-2000-22024 to develop the Dynamic Interactive Vulnerability Assessment (DIVA) model. The data was extracted from the model from the Inter-Sectoral Impact Model Intercomparison Project Fast Track funded by the German Federal Ministry of Education and Research (Project 01LS1201A). Further analysis occurred under the European Commission’s Seventh Framework Programme’s collaborative project RISES-AM-(contract FP7-ENV-2013-two stage-603396).
Funding Information:
We also acknowledge funding from the European Union’s Seventh Framework Programme for research, technological development and demonstration for the ECONADAPT project under grant agreement no 603906; and from the Italian Ministry of Education, University and Research and the Italian Ministry of Environment, Land and Sea under the GEMINA project.
Publisher Copyright:
© 2020, Springer Nature B.V.
Keywords:
Adaptation, Climate change, Computable general equilibrium, Public budgets, Sea level rise, Sustainability
Identifiers
Local EPrints ID: 437591
URI: http://eprints.soton.ac.uk/id/eprint/437591
ISSN: 0165-0009
PURE UUID: 64deb527-ba1c-42bd-b354-10d8815800a8
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Date deposited: 06 Feb 2020 17:31
Last modified: 17 Mar 2024 05:17
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Contributors
Author:
Ramiro Parrado
Author:
Francesco Bosella
Author:
Elisa Delpiazzo
Author:
Jochen Hinkel
Author:
Daniel Lincke
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