Local Adaptation and Unintended Coastal Vulnerability: The Effect of Beach Nourishment on Residential Development in North Carolina

Xiaoyu Li, Sathya Gopalakrishnan and H. Allen Klaiber

Journal of the Association of Environmental and Resource Economists, 2024, vol. 11, issue 3, 523 - 548

Abstract: As climate change threatens to exacerbate coastal erosion and storm risk, understanding the impact of increasing risk and adaptation investments is crucial for effective long-term coastal management. We examine risk exposure of coastal communities using a supply-side analysis of nearshore residential development. We develop a duration model to examine the effects of climate risk and local adaptation investments on the pattern of residential development in coastal North Carolina between 1994 and 2013. Using a control function approach to address endogeneity in adaptation, we find that investment in beach re-nourishment increases the likelihood of coastal development, resulting in unintended acceleration of development in vulnerable locations. Our findings suggest caution in developing policies that combat coastal risk in isolation. As investments in built capital stock are often irreversible, faster development, which increases the value of built capital at risk, is likely to constrain future efforts to adapt to climate change.

Date: 2024
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