Working Paper: NBER ID: w24645
Authors: sarah e anderson; terry l anderson; alice c hill; matthew e kahn; howard kunreuther; gary d libecap; hari mantripragada; pierre mrel; andrew plantinga; v kerry smith
Abstract: This paper summarizes and synthesizes the role of markets in facilitating climate change adaptation. It explains how market signals encourage adaptation through land markets. It also identifies impediments to critical market signals, provides related policy recommendations, and points to promising new technologies. Urban, coastal, and agricultural land markets provide effective signals of the emerging costs of climate change. These signals encourage adjustments by both private owners and by policy officials in taking preemptive action to reduce costs. In agriculture, they promote consideration of new cropping and tillage practices, seed types, timing, and location of production. They also stimulate use of new irrigation technologies. In urban areas, they motivate new housing construction, elevation, and location away from harm. They channel more efficient use of water and its application to parks and other green areas to make urban settings more desirable with higher temperatures. To be effective, however, land markets must reflect multiple traders and prices must be free to adjust. Where these conditions are not met, land market signals will be inhibited and market-driven adaptation will be reduced. Because public policy is driven by constituent demands, it may not be a remedy. The evidence of the National Flood Insurance Program and federal wildfire response illustrates how politically difficult it may be to adjust programs to be more adaptive.
Keywords: No keywords provided
JEL Codes: Q1; Q15; Q21; Q22; Q24; Q25; Q28; Q51; Q54; R14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Market signals (G10) | adaptation decisions (D91) |
| Market signals (G10) | changes in land use (R14) |
| Market signals (G10) | cropping practices (Q15) |
| Market signals (G10) | irrigation technologies (Q55) |
| Impediments to market signals (D52) | effective adaptation (O36) |
| Climate forecasts (Q47) | farmland prices (Q15) |
| Urban housing markets (R31) | changes in housing prices (R31) |
| Effective price signals in water markets (D41) | reallocation of water resources (Q25) |
| Reallocation of water resources (Q25) | enhance agricultural and urban resilience (Q54) |