Progressive adaptation strategies in European coastal cities: a response to flood-risk under uncertainty

Luis M. Abadie, Elisa Sainz de Murieta, Ibon Galarraga and Anil Markandya

Chapter 8 in Handbook on the Economics of Climate Change, 2020, pp 167-198 from Edward Elgar Publishing

Abstract: This chapter presents a stochastic diffusion model to model sea-level rise (SLR) in a novel, non-deterministic way. The use of this model allows us to estimate two risk measures, VAR and ES that, while relatively well-known in financial economics and very suitable measures to analyse SLR, have not been used sufficiently to address issues such as climate impacts. The VAR measure will enable understanding the threshold of average damages that leads to the worst 5% of the cases. The ES instead shows what the average damage will be for those 5% worst cases. Dealing with these low probability but very large impacts is a relevant issue in climate change economics. We illustrate the methodology by assessing the risk of SLR in 19 major European coastal cities and show that, when uncertainty is present, VAR and ES measures are better guides for policy than usual average values.

Keywords: Economics and Finance; Environment (search for similar items in EconPapers)
Date: 2020
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