Adaptor of last resort? An economic perspective on the government’s role in adaptation to climate change

Abstract Individuals and societies have always adapted to change, whether catastrophic or slow onset. Over the last two centuries, however, governments have significantly extended their role as ultimate social manager of risk.  It is as yet unclear whether, how, or to what extent governments will add adaptation to climate change to their portfolio of responsibilities.  This report investigates this question on the basis of review and analysis of economic and policy thinking on the issues, and by using a new dataset on the 2011 Brisbane flood. Uncertainties about the future impacts of climate change obviate definitive conclusions about future adaptation actions and insights for specific situations cannot be generalised.  Economic precepts suggest that governments should limit intervention to cases of genuine market failure, such as the provision of information on likely impacts of climate change including at the local level, or to support for people affected by uninsurable events.  But any role as ‘insurer of last resort’ needs to be circumscribed by rigorous social cost-benefit analysis to ensure that government intervention is beneficial, in the context of the need to adapt to climatic changes.  Although the phenomenon of ‘government failure’ is generally ignored in the adaptation literature (and often by policy makers), it too can stymie efficient adaptation.  A standard justification for government intervention is market failure, including misperception of risk by individuals and businesses.  We use Brisbane property prices before and after the January 2011 flood, as well as property-level flood risk information to test the hypothesis that buyers do not accurately perceive the risk of riverine flooding.  The results indicate that buyers do take risk into account, and even discriminate between zones of differing flood risk.  The concepts of ‘government as insurer of last resort’ and ‘government as insurer of first resort’ as alternative forms of intervention in markets are examined with a view to disambiguation.  In contrast to much current thinking in academic and government circles, we conclude that the government should not act as an ‘adaptor of first or last resort’.  Rather, government can best contribute to efficient adaptation by reducing the economic costs and institutional barriers to adaptation faced by individuals and organisations.Comprehensive micro-economic reform, and the promotion of institutional flexibility are potential ‘no regrets’ strategies because they will also promote economic growth and welfare.Please cite as: Dobes, L, Jotzo, F, Doupé, P 2013 Adaptor of last resort? An economic perspective on the Government’s role in adaptation to climate change, National Climate Change Adaptation Research Facility, Gold Coast, pp. 81.Individuals and societies have always adapted to change, whether catastrophic or slow onset. Over the last two centuries, however, governments have significantly extended their role as ultimate social manager of risk.  It is as yet unclear whether, how, or to what extent governments will add adaptation to climate change to their portfolio of responsibilities.  This report investigates this question on the basis of review and analysis of economic and policy thinking on the issues, and by using a new dataset on the 2011 Brisbane flood. Uncertainties about the future impacts of climate change obviate definitive conclusions about future adaptation actions and insights for specific situations cannot be generalised.  Economic precepts suggest that governments should limit intervention to cases of genuine market failure, such as the provision of information on likely impacts of climate change including at the local level, or to support for people affected by uninsurable events.  But any role as ‘insurer of last resort’ needs to be circumscribed by rigorous social cost-benefit analysis to ensure that government intervention is beneficial, in the context of the need to adapt to climatic changes.  Although the phenomenon of ‘government failure’ is generally ignored in the adaptation literature (and often by policy makers), it too can stymie efficient adaptation.  A standard justification for government intervention is market failure, including misperception of risk by individuals and businesses.  We use Brisbane property prices before and after the January 2011 flood, as well as property-level flood risk information to test the hypothesis that buyers do not accurately perceive the risk of riverine flooding.  The results indicate that buyers do take risk into account, and even discriminate between zones of differing flood risk.  The concepts of ‘government as insurer of last resort’ and ‘government as insurer of first resort’ as alternative forms of intervention in markets are examined with a view to disambiguation.  In contrast to much current thinking in academic and government circles, we conclude that the government should not act as an ‘adaptor of first or last resort’. Rather, government can best contribute to efficient adaptation by reducing the economic costs and institutional barriers to adaptation faced by individuals and organisations.Comprehensive micro-economic reform, and the promotion of institutional flexibility are potential ‘no regrets’ strategies because they will also promote economic growth and welfare.Please cite as: Dobes, L, Jotzo, F, Doupé, P 2013 Adaptor of last resort? An economic perspective on the Government’s role in adaptation to climate change, National Climate Change Adaptation Research Facility, Gold Coast, pp. 81.&nbsp

What role for safety net transfers in very low income countries?

The authors consider the question of what role safety net transfers should play in very low income countries where a large population live in absolute poverty, and the state has limited resources to fund transfers. The number of people living below minimum acceptable consumption levels will remain so high that some form of safety net intervention is justified. For pure transfers, governments should be selective of very specific groups such as orphans, to limit costs and engender political support. To improve the impact per dollar spent on transfers, programs should be selected to have a multiplier effect on incomes such as vouchers for small fertilizers packs for the poor, or to leverage by using small amounts of cash to help households reduce risk or diversify economic activity. Selection of programs that are self-targeting, such as public works at a low wage rate or subsidized food goods. The judicious timing of transfers is important. Programs should also be kept as simple as possible to fit with the limited administrative capacity, avoiding multiple overlapping donor programs in favor of one or two simple nationwide programs that are easily implemented, cost-effective, and fiscally sustainable.Safety Nets and Transfers,Services&Transfers to Poor,Rural Poverty Reduction,Poverty Assessment,Achieving Shared Growth

Technology assessment of portable energy RDT and P

Results are presented of a workshop conducted to assess portable energy technology. The results were evaluated and areas for future research were considered. Several research categories were studied: increasing presently available fuel supplies, developing new fuel sources, utilization of new transportation fuels, improving conservation practices, and equitable distribution of fuel supplies. Several research projects were proposed, and work statements were constructed for those considered suitable

Performance specifications for a meteorological satellite lidar Final report

Cirrus cloud cover observation capability and performance specifications for meteorological satellite lida

Revenue-Based Auctions and Unbundling Infrastructure Franchises

This paper discusses privatization among investments in infrastructure. The goal of this paper is to present a new auction mechanism that solves many of the problems that have hindered the use of franchises. The first section of the paper discusses least present value of revenue (LPVR) auctions, where the regulator fixes user fees (according to some optimizing criterion) and asks for bids on the present value of revenue from user fees that franchise holders will accept in exchange for building, operating and maintaining the infrastructure. Section 2 of the paper classifies infrastructure projects according to their technological characteristics in order to establish conditions under which franchising is feasible and desirable. In Section 3, the authors discuss several conceptual issues that arise in franchising. Section 4 discusses the shortcomings of fixed-term mechanisms. Section 5 introduces and analyzes LPVR auctions. Section 6 discusses the unbundling of franchises. The authors' conclusions are presented in the final section.Infrastructure & Transport, Private Sector, least present value of revenue (LPVR) auctions, privatization, infrastructure sector

The reliability of product-specific eco-labels as an agrobiodiversity management instrument

This paper seeks to understand why multinationals prefer to launch a label specific to their own product and examines how reliable these product-specific eco-labels are. A new methodology is applied to assess the extent to which eco-labels live up to claims about their contribution to conservation and the sustainable use of agricultural biodiversity. Product-specific eco-labels are considered as industry self-regulation and all three regulatory stages are studied: the planning, implementation and outcome stage. There are major differences between the product specific eco-labels in the degree in which agrobiodiversity management is part of the normative labeling schemes. Although there are some problems of reliability, such as transparency in the implementation stage and the monitoring in the outcome stage, the degree of reliability of product-specific labels is comparable with eco-labels of international labeling families. The conclusion is that only one of the product-specific eco-labels examined here is reliable when examined in the light of all three stages. The main reason why multinationals establish a product-specific eco-label instead of adopting one from an existing labeling family is that they want to profile themselves as distinct from other companies. The unique character of a product-specific label creates a market opportunity for them

Prospects for an international economy

Cover title"January, 1957.""619"--handwritten on cover"A review of Gunnar Myrdal, An International Economy; Problems and Prospects. Prepared for World Politics.""Economic Development. Indonesia Project."Includes bibliographical reference

On Taxation in a Two-Sector Endogenous Growth Model with Endogenous Labor Supply

This paper studies the effects of taxation on long-run growth in a two-sector endogenous growth model with (i) physical capital as an input in the education sector and (ii) leisure as an additional argument in the utility function. Due to the flexibility of labor supply, taxation of income may induce agents to spend more or less time on leisure activities. Income taxation - the same rate applies for capital and labor income - reduces the growth rate. The contribution of endogenous leisure in this case is confined to reducing or increasing the size of the effect on the growth rate. The same is true if only labor income is taxed. However, if only capital income is taxed, the sign of the effect may reverse. In that case, the positive effect of the increase in total non-leisure time dominates the direct negative effect, implying that capital taxation increases the long-run growth rate.