Total Costs and Budgetary Effects of Adaptation to Climate Change: An Assessment for the European Union

Adaptation to climate change is gaining increasing relevance in the public debate of climate policy. However, detailed and regionalised cost estimates as a basis for cost-benefit-analyses are rare. We compose available cost estimates for adaptation in Europe, and in particular Germany, Finland and Italy. Furthermore, a systematic overview on fiscal aspects of adaptation is provided, with focus on budgetary effects of adaptation in the different impact sectors. Combining cost estimates, considerations on fiscal aspects and governmental interventions in adaptation processes, we present data-based guesses of public adaptation costs in the EU, divided by impact sectors. The findings show an expectedly large public burden in the adaptation of transport infrastructure and coastal protection, while high adaptation costs in the agriculture sector are predominantly private. The change in energy demand may well lead to a significant decrease in public expenditure. Considering the regional heterogeneity of adaptation measures and the high uncertainty of quantitative adaptation analyses, further research in the form of bottom-up-studies is needed.adaptation, climate change, adaptation costs, fiscal effects, governmental intervention

Total costs and budgetary effects of adaptation to climate change: An assessment for the European Union

Adaptation to climate change is gaining increasing relevance in the public debate of climate policy. However, detailed and regionalised cost estimates as a basis for cost-benefit-analyses are rare. We compose available cost estimates for adaptation in Europe, and in particular Germany, Finland and Italy. Furthermore, a systematic overview on fiscal aspects of adaptation is provided, with focus on budgetary effects of adaptation in the different impact sectors. Combining cost estimates, considerations on fiscal aspects and governmental interventions in adaptation processes, we present data-based guesses of public adaptation costs in the EU, divided by impact sectors. The findings show an expectedly large public burden in the adaptation of transport infrastructure and coastal protection, while high adaptation costs in the agriculture sector are predominantly private. The change in energy demand may well lead to a significant decrease in public expenditure. Considering the regional heterogeneity of adaptation measures and the high uncertainty of quantitative adaptation analyses, further research in the form of bottom-up-studies is needed. --adaptation,climate change,adaptation costs,fiscal effects,governmental intervention

The determinants of private flood mitigation measures in Germany - evidence from a nationwide survey

Public flood protection cannot totally eliminate the risk of flooding. Hence, private mitigation measures which proactively protect homes from being flooded or reduce flood damage are an essential part of modern flood risk management. This study analyses private flood mitigation measures among German households. The dataset covers more than 6000 households from all parts of the country, including flood plains as well as areas which are typically not at a high risk of riverine flooding. The results suggest that the propensity to mitigate flood damage increases i.a. with past damage experience and damage expectations for the future. The latter effect can be interpreted as a ’climate adaptation signal’ in the flood mitigation behaviour. All other factors remaining equal, a strong belief in a climate-change-induced increase of personal flood damage in the next decades induces an increase of the probability of flood mitigation by more than 10 percentage points. Moreover, strong evidence for moral hazard effects in the flood mitigation behaviour cannot be observed. Households expecting insurance coverage do not reduce their mitigation efforts. Likewise, the expectation of government relief payments hinders mitigation only for some groups of households

Direct and indirect effects of weather experiences on life satisfaction : which role for climate change expectations?

This paper deals with the effect of (I) damage experience from extreme weather events and (II) expectations concerning future climate change on subjective wellbeing (SWB). We use data of a large representative survey amongst German households. The effect of experienced weather events on SWB of the heads of the households is only significant for heat waves; not for storms, heavy rain, and floods. Concern about future climate change on the household level has a substantial negative impact on current SWB. Moreover, we divide the impact of experience into direct effects of damage and indirect effects, which affect current SWB via the channel of expectations regarding future climate change. Both direct and indirect effects of weather experiences are quantified. It becomes apparent that the indirect effect is significant but small compared to the direct effect

General knowledge about climate change, factors influencing risk perception and willingness to insure

In two empirical surveys in Germany the link between the information respondents have about climate change and their risk perception of the phenomenon was analysed. We found that a better understanding of the effects of climate change might lead to a decrease of the perceived hazard. In contrast, a high self-declared knowledge about climate change might correspond with higher risk perception. Further factors affecting the risk perception of climate change are gender, experience of extreme weather events and trust in external aid. Surprisingly, information campaigns based on scientific facts are not effective for increasing risk perception and willingness to insure. Higher risk perception might induce higher interest in precautionary measures like insurance. --Climate Change,Knowledge Illusion,Insurance,Risk Perception,Information,Psychometric paradigm

Extreme weather and risk preference : panel evidence from Germany

Individual risk preference may change after experiencing external socio-economic or natural shocks. Theoretical predictions and empirical studies suggest that risk taking may increase or decrease after experiencing shocks. So far the empirical evidence is sparse, especially when it comes to developed countries. We contribute to this literature by investigating whether experiencing financial and health-related damage caused by storms affects risk preference of individuals in Germany. Using unique panel data, we find that households who report storm damage increased their risk taking. We do not find evidence of exposure to storm per see (regardless of damage experience), which suggests that households have to suffer damage for their risk preference to be affected. These results are robust across a battery of alternative model specifications and alternative storm damage measures (magnitude of financial damage). We rule out other potential explanations such as health-related and economic shocks. The self-reported storm damage data is broadly confirmed by regional storm damage data provided by the insurance industry. While we cannot identify the channels through which experiencing storm damage affects risk preference from our data, we suggest and discuss some potential channels. The results may have important policy implications as risk preference affects, for instance, individuals’ savings and investment behaviour, adoption of self-protection and self-insurance strategies, and technology adoption

Natural disasters and governmental aid : is there a charity hazard?

In the aftermath of natural disasters, governments frequently provide financial aid for affected households. This policy can have adverse effects if individuals anticipate it and forgo private precaution measures. While theoretical literature unequivocally suggests this so called “charity hazard”, empirical studies yield ambiguous results. Drawing on rich survey data from German homeowners, we analyze charity hazard for different flood precaution strategies, namely insurance uptake and non-financial protection measures, and different flood risk areas. Our results indicate a substantial charity hazard in the insurance market for individuals residing in flood-prone areas. In contrast, we find a positive correlation between governmental aid and non-financial protection measures. Moreover, our results suggest that insurance and non-financial protection measures are rather complements than substitutes. Finally, we provide suggestive evidence that status-quo bias might play an important role for insurance uptake

Versicherung von Hochwasserschäden klimasicher und sozial verträglich gestalten

Im Juli 2021 wurde der Westen Deutschlands von verheerenden Sturzfluten heimgesucht, die eine Vielzahl an Todesopfern gefordert haben. Neben den menschlichen Tragödien gab es wirtschaftliche Schäden in Milliardenhöhe. Häuser wurden unbewohnbar, ökonomische Existenzen von Privathaushalten und Unternehmen wurden zerstört. Ein Großteil der Betroffenen war gegen Hochwasserschäden nicht versichert. Um die finanziellen Verluste von Haushalten und Unternehmen ohne Versicherungsschutz zumindest teilweise aufzufangen, haben Bundes- und Landesregierungen einen steuerfinanzierten Fluthilfefonds in Höhe von 30 Milliarden Euro beschlossen. So notwendig und begrüßenswert Solidarität in einer akuten Notlage ist, so eindeutig zeigt das Geschehen die fehlende Nachhaltigkeit des derzeitigen Versicherungsmarktes für Hochwasserschäden auf. Angesichts des fortschreitenden Klimawandels ist mit einer Zunahme der Häufigkeit und Intensität von Hochwasserereignissen in Deutschland zu rechnen. Daher sollte über eine nachhaltigere Vorsorge nachgedacht werden. In diesem Policy Brief wird anhand neuester empirischer Ergebnisse diskutiert, warum der Versicherungsmarkt für Hochwasser in Deutschland anders organisiert werden sollte und welche Möglichkeiten es für eine Neugestaltung gibt

The effects of natural disasters and weather variations on international trade: a review of the empirical literature

This review summarizes the empirical literature on the effects of natural disasters and weather variations on international trade flows. A first result is that the body of literature is actually not as small as previously suggested. In total, I summarize 19 studies of 18 independent research teams and show that there is a large diversity in terms of motivations, data sets used, methodologies, and results. Still, some overarching conclusions can be drawn. Increases in average temperature seem to have a detrimental effect on export values (less on imports), mainly for manufactured and agricultural products. Given climate change, this is an important finding for projecting long-term developments of trade volumes. Imports seem to be less affected by temperature changes in the importing country. Findings on the effects of natural disasters are more ambiguous, but at least it can be said that exports seem to be affected negatively by occurrence and severity of disasters in the exporting country. Imports may decrease, increase, or remain unaffected by natural disasters. Regarding heterogeneous effects, small, poor, and hot countries with low degrees of institutional quality and political freedom seem to face the most detrimental effects on their trade flows. Possible directions of future research include analyzing spillover effects in-depth (in terms of time, space, and trade networks), considering adaptation, and using more granular data

Individual adaptation to climate change : the role of information and perceived risk

Given that many of the predicted effects of climate change are considered imminent and unavoidable, the need to mainstream adaptation as a viable coping measure among private households is becoming a topic of increasing importance. However, little research to date has assessed the factors influencing the motivation to autonomously adapt, nor any successful measures for instigating this behavioural change. This study investigates whether providing locally-focused vs. globally-focused information about the effects of climate change influences the personal perceived risk (PPR) of individual people. Based on a socio-psychological model, Protection Motivation Theory (PMT), it is hypothesized that a higher PPR will lead to a higher motivation to adapt. While this hypothesis has been empirically confirmed by the study, it has been found that providing information on climate change effects that is more personally relevant to the individual and is concerned with his local surroundings does not significantly increase PPR. This may be due to a trade-off between spatial-temporal distance and the comparably low severity of predicted effects in the study region. Interestingly, providing any kind of information, irrespective of having a global or local focus, also did not increase PPR as compared to receiving no information. These results suggest that the sole provision of information about expected climate change impacts, even if tailored to one's individual context, does not significantly increase PPR and consequently the motivation to adapt. Another necessary factor might be increasing the knowledge about concrete coping options to allow people to weigh up their personal options