Economic impacts of climate change in Europe: sea level rise

This paper uses two models to examine the direct and indirect costs of sea-level rise for Europe for a range of sea-level rise scenarios for the 2020s and 2080s: (1) the DIVA model to estimate the physical impacts of sea-level rise and the direct economic cost, including adaptation, and (2) the GTAP-EF model to assess the indirect economic implications. Without adaptation, impacts are quite significant with a large land loss and increase in the incidence of coastal flooding. By the end of the century Malta has the largest relative land loss at 12% of its total surface area, followed by Greece at 3.5% land loss. Economic losses are however larger in Poland and Germany (483 and 391 million, respectively). Coastal protection is very effective in reducing these impacts and optimally undertaken leads to protection levels that are higher than 85% in the majority of European states. While the direct economic impact of sea-level rise is always negative, the final impact on countries’ economic performances estimated with the GTAP-EF model may be positive or negative. This is because factor substitution, international trade, and changes in investment patterns interact with possible positive implications. The policy insights are (1) while sea-level rise has negative and huge direct economic effects, overall effects on GDP are quite small (max −0.046% in Poland); (2) the impact of sea-level rise is not confined to the coastal zone and sea-level rise indirectly affects landlocked countries as well (Austria for instance loses −0.003% of its GDP); and (3) adaptation is crucial to keep the negative impacts of sea-level rise at an acceptable level