Economic Justification for Action Now in Rhode Island. What is the evidence that acting now saves money by James Neumann, Industrial Economics.

1. IEc
INDUSTRIAL ECONOMICS, INCORPORATED
Economic Justification for
Action Now in Rhode Island
James Neumann
Principal
Baird Sea Grant
Science Symposium
Newport, RI
December 2014

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Overview and main messages
• There are useful lessons from new efforts to explore
economic implications of adaptation to coastal.
• New greenhouse gas reduction actions will reduce the
economic impact of sea-level rise and storm surge
threats, but you’ll still need to adapt.
• Adaptation has been shown to be cost-effective in
many contexts – but you will need to start planning (and
acting) now if you want the best “bang for the buck.”
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• Convening Lead Authors
• Susi Moser (Susanne Moser Research &
Consulting and Stanford University
• Margaret Davidson (NOAA)
• Lead authors
• Paul Kirshen (UNH)
• Peter Mulvaney (Green Lead Advisors)
• Jim Murley (South Florida Regional Planning Council)
• Jim Neumann (Industrial Economics, Inc.)
• Laura Petes (NOAA)
• Denise Reed (The Water Institute of the Gulf)
Chapter 25:
Coastal zone, development and
ecosystems
http://nca2014.globalchange.gov/report/regions/coasts

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Economic Disruption
Nationally important assets, such as ports,
tourism, and fishing sites, in already-
vulnerable coastal locations, are
increasingly exposed to sea level rise and
related hazards. This threatens to disrupt
economic activity within coastal areas and
the regions they serve and results in
significant costs from protecting or moving
these assets.

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Coast-to-Inland Economic Connections

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Coast-to-Inland Economic Connections: Rhode Island 2007

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Coast-to-Inland Economic Connections: Rhode Island 2040

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How costs are reduced by GHG mitigation policy
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Economic implications for the US of adapting (or not)
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Adaptation
Option Scenario
Discounted Cost
(3% DR, billion 2005$,
2015 base year)
Full Cost-
Effective
Adaptation
Reference (BAU) $690
Mitigation Policy 3.7 $669
Benefits $21
Benefits (percent
change) 3.0%
No Adaptation
or Protection
Reference (BAU) $4,250
Mitigation Policy 3.7 $4,024
Benefits $226
Benefits (percent
change) 5.3%

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Cumulative benefits of mitigation:
economically efficient adaptation vs. no adaptation
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Area at risk of SLR and storm surge – Tampa area
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With Rhode
Island’s new
mapping
resources,
this type of
analysis can
be easily
conducted
locally.

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What if Tampa adapts to these threats?
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Vulnerable assets in Rhode Island
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Vulnerable assets in Rhode Island
• Property (residential, commercial, industrial,
institutional)
• Infrastructure (energy, transport, ports, bridges,
sewerage/drainage, other utilities)
• Secondary/indirect effects (e.g., business interruption,
power outages, electric grid failure, transport
infrastructure failures)
• Recreation resources
• Ecological resources (e.g., wetlands, fisheries)
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Adaptation response to SLR under
reference scenario by 2100
Areas at risk of SLR under reference
scenario by 2100

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Providence
Kent
Washington
Bristol
Newport
Cumulative Damages under Reference Scenario (Undiscounted, Million 2005$)

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Risky Business Report
• Risk Management Solutions (RMS) analysis examined what
is at risk, with no adaptation
• IEc analysis examined adaptation options using four
scenarios:
1. No defensive investments (no adaptation)
2. Individual property owner action (e.g., elevation)
3. Property owner action plus beach nourishment
4. Property owner action, beach nourishment, and shoreline
armoring
• Key Finding 1: Costs increase as the options available to
adapt decrease (highest cost for scenario 1, lowest for
scenario 4)
• Key Finding 2: The no adaptation option is four to six
times higher cost than the full adaptation option
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Important Results:
1. No strategies are cost-
effective under
current climate
2. All strategies cost-
effective with mid-
level SLR projection,
particularly shoreline
minimization (left
map) and flood-
proofing (right map)
Source: Aerts et al., Science, 344:
473-475. 2 May 2014

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Take home messages
• Don’t assume you can adapt to all climate change – there will be
“residual risks”
• The US is highly vulnerable, in economic terms, to coastal threats
• Mitigating GHGs will help reduce the threat – but it will take time
to have a significant impact
• Adaptation in the coastal zone, in general, is a cost effective
option, particularly in densely populated areas
• The sooner you start, the better off you’ll be – the first step for
Rhode Island is to tailor some of the existing work to support
near-term decision-making
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Thank You

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How did we think about economics and taking adaptation
action in the IPCC report?

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Potential for High Adaptive Capacity:
Hurricane Ike, Gilchrist, TX

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Potential for High Adaptive Capacity:
Hurricane Ike, Gilchrist, TX

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What does it look like today?
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Modeling Response to SLR
Q1:
Is cell
elevation less
than relative
SL in that
year?
Q2:
Is cell
land and
structure value
more than protection
cost (capital
plus O&M)?
Q3:
Are any
neighbors
threatened?
Q4:
Is cell
plus neighbor cells
land and structure
value more than cell
plus neighbor
protection
cost?
Yes Yes Yes Yes
Not threatened
No
Abandon
Cost = land +
structure value
No
Elevate
Cost =
elevation cost
for structure
and some
surrounding land
NoNo
Armor/Nourish
Cost to armor =
capital + annual O&M
Cost to nourish =
incremental sand
cost, with new
sand each decade

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Costs of efficient adaptations to SLR and storm surge
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Centimeters SLR for Providence and Newport Tide Gauges (Kopp et al., 2014)
Providence Newport