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THE CRITICAL ROLE OF MARKETS IN CLIMATE CHANGE ADAPTATION

Sarah E. Anderson (), Terry L. Anderson (), Alice C. Hill (), Matthew Kahn (), Howard Kunreuther (), Gary D. Libecap, Hari Mantripragada (), Pierre Mérel (), Andrew J. Plantinga () and V. Smith
Additional contact information
Sarah E. Anderson: Bren School of Environmental Science and Management, 2400 Bren Hall, University of California, Santa Barbara, CA 93106, USA
Terry L. Anderson: Hoover Institution, Stanford University, CA 94305, USA
Alice C. Hill: Hoover Institution, 1399 New York Ave. NW, Washington, DC 20005, USA
Howard Kunreuther: Decision Sciences & Public Policy, Operations, Information and Decisions (OID), Risk Management and Decision Processes Center, Wharton School, University of Pennsylvania, 3730 Walnut St., #563 Huntsman Hall, Philadelphia, PA 19104-6340, USA
Gary D. Libecap: Hoover Institution, Stanford University, CA 94305, USA6Economics Department, Bren School of Environmental Science and Management, University of California, Santa Barbara, California, 93106, NBER, USA
Hari Mantripragada: Department of Chemical and Petroleum Engineering, 940 Benedum Hall, University of Pittsburgh, 3700 O’Hara St, Pittsburgh, PA 15261, USA
Andrew J. Plantinga: Bren School of Environmental Science and Management, University of California, Santa Barbara, CA 93106-5131, Office

Climate Change Economics (CCE), 2019, vol. 10, issue 01, 1-17

Abstract: Markets, especially land markets, can facilitate climate change adaptation through price signals. A review of research reveals that 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 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. Related water markets play a similar role in adjusting water use and reallocation. To be effective, however, markets must reflect multiple traders and prices must be free to adjust. Where these conditions are not met, 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: Climate change; adaptive responses; land markets; water markets; urban; agricultural signals and responses (search for similar items in EconPapers)
Date: 2019
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Working Paper: The Critical Role of Markets in Climate Change Adaptation (2018) Downloads
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DOI: 10.1142/S2010007819500039

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