IDEAS home Printed from https://ideas.repec.org/p/zbw/zewdip/09057.html
   My bibliography  Save this paper

The economics of adaptation to climate change: the case of Germany

Author

Listed:
  • Dannenberg, Astrid
  • Mennel, Tim
  • Osberghaus, Daniel
  • Sturm, Bodo

Abstract

Given the ubiquitous scarcity of resources an economic approach is necessary in order to determine an optimal strategy of adaptation to climate change. In this paper we develop an economic framework for the study of adaptation which allows us to distinguish between decentralized adaptation by private agents on the one hand and centralized adaptation measures by public authorities on the other. The approach is based on the paradigm of market failure and is complemented by two further grounds of government action, equity concerns and security of supply. We identify open research questions in the nascent field of adaptation to climate change requiring further empirical investigation. The economic framework is applied to adaptation in Germany by analyzing impacts and adaptation options for climate-sensitive fields such as agriculture, energy, water, and public health.

Suggested Citation

  • Dannenberg, Astrid & Mennel, Tim & Osberghaus, Daniel & Sturm, Bodo, 2009. "The economics of adaptation to climate change: the case of Germany," ZEW Discussion Papers 09-057, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:09057
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/28248/1/609867490.PDF
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nordhaus, William D, 1991. "To Slow or Not to Slow: The Economics of the Greenhouse Effect," Economic Journal, Royal Economic Society, vol. 101(407), pages 920-937, July.
    2. Silvio Schmidt & Claudia Kemfert & Peter Höppe, 2008. "Tropical Cyclone Losses in the USA and the Impact of Climate Change: A Trend Analysis Based on a New Dataset," Discussion Papers of DIW Berlin 802, DIW Berlin, German Institute for Economic Research.
    3. Enrica De Cian & Elisa Lanzi & Roberto Roson, 2007. "The Impact of Temperature Change on Energy Demand: A Dynamic Panel Analysis," Working Papers 2007.46, Fondazione Eni Enrico Mattei.
    4. Epstein, Richard A, 1996. "Catastrophic Responses to Catastrophic Risks," Journal of Risk and Uncertainty, Springer, vol. 12(2-3), pages 287-308, May.
    5. Richard Tol, 2007. "The double trade-off between adaptation and mitigation for sea level rise: an application of FUND," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 12(5), pages 741-753, June.
    6. Bigano, Andrea & Bosello, Francesco & Roson, Roberto & Tol, Richard S.J., 2006. "Economy-Wide Estimates of the Implications of Climate Change: A Joint Analysis for Sea Level Rise and Tourism," Climate Change Modelling and Policy Working Papers 12022, Fondazione Eni Enrico Mattei (FEEM).
    7. Indur Goklany, 2007. "Integrated strategies to reduce vulnerability and advance adaptation, mitigation, and sustainable development," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 12(5), pages 755-786, June.
    8. Hübler, Michael & Klepper, Gernot & Peterson, Sonja, 2008. "Costs of climate change: The effects of rising temperatures on health and productivity in Germany," Ecological Economics, Elsevier, vol. 68(1-2), pages 381-393, December.
    9. Kunreuther, Howard, 1996. "Mitigating Disaster Losses through Insurance," Journal of Risk and Uncertainty, Springer, vol. 12(2-3), pages 171-187, May.
    10. Pindyck, Robert S, 1991. "Irreversibility, Uncertainty, and Investment," Journal of Economic Literature, American Economic Association, vol. 29(3), pages 1110-1148, September.
    11. Bosello, Francesco & Roson, Roberto & Tol, Richard S.J., 2006. "Economy-wide estimates of the implications of climate change: Human health," Ecological Economics, Elsevier, vol. 58(3), pages 579-591, June.
    12. Francesca Colombo, 2001. "Towards More Choice in Social Protection?: Individual Choice of Insurer in Basic Mandatory Health Insurance in Switzerland," OECD Labour Market and Social Policy Occasional Papers 53, OECD Publishing.
    13. Dieter Helm, 2008. "Climate-change policy: why has so little been achieved?," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 24(2), pages 211-238, Summer.
    14. Kelly de Bruin & Rob Dellink & Shardul Agrawala, 2009. "Economic Aspects of Adaptation to Climate Change: Integrated Assessment Modelling of Adaptation Costs and Benefits," OECD Environment Working Papers 6, OECD Publishing.
    15. Abbott, Malcolm, 2001. "Is the Security of Electricity Supply a Public Good?," The Electricity Journal, Elsevier, vol. 14(7), pages 31-33.
    16. Schoemaker, Paul J H, 1982. "The Expected Utility Model: Its Variants, Purposes, Evidence and Limitations," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 529-563, June.
    17. Weisskopf, M.G. & Anderson, H.A. & Foldy, S. & Hanrahan, L.P. & Blair, K. & Török, T.J. & Rumm, P.D., 2002. "Heat wave morbidity and mortality, Milwaukee, Wis, 1999 vs 1995: An improved response?," American Journal of Public Health, American Public Health Association, vol. 92(5), pages 830-833.
    18. Martin L. Weitzman, 2009. "On Modeling and Interpreting the Economics of Catastrophic Climate Change," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 1-19, February.
    19. Francis M. Bator, 1958. "The Anatomy of Market Failure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 72(3), pages 351-379.
    20. Wolfram Schlenker & Michael J. Roberts, 2008. "Estimating the Impact of Climate Change on Crop Yields: The Importance of Nonlinear Temperature Effects," NBER Working Papers 13799, National Bureau of Economic Research, Inc.
    21. Andrea Bigano & Maria Berrittella & Roberto Roson & Richard S.J. Tol, 2004. "A General Equilibrium Analysis of Climate Change Impacts on Tourism," Working Papers 2004.127, Fondazione Eni Enrico Mattei.
    22. Michael Rothschild & Joseph Stiglitz, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(4), pages 629-649.
    23. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    24. Timothy Goodspeed & Andrew Haughwout, 2012. "On the optimal design of disaster insurance in a federation," Economics of Governance, Springer, vol. 13(1), pages 1-27, March.
    25. Anthoff, David & Hepburn, Cameron & Tol, Richard S.J., 2009. "Equity weighting and the marginal damage costs of climate change," Ecological Economics, Elsevier, vol. 68(3), pages 836-849, January.
    26. Wallace E. Oates & Wallace E. Oates, 2004. "An Essay on Fiscal Federalism," Chapters, in: Environmental Policy and Fiscal Federalism, chapter 22, pages 384-414, Edward Elgar Publishing.
    27. Cynthia Rosenzweig & Francesco Tubiello, 2007. "Adaptation and mitigation strategies in agriculture: an analysis of potential synergies," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 12(5), pages 855-873, June.
    28. Komar, Walter, 1999. "Trinkwasserversorgung in Deutschland: wirksamer Grundwasserschutz notwendig," Wirtschaft im Wandel, Halle Institute for Economic Research (IWH), vol. 5(2), pages 7-12.
    29. Robert McDonald & Daniel Siegel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(4), pages 707-727.
    30. Reimund Schwarze & Gert G. Wagner, 2006. "The Political Economy of Natural Disaster Insurance: Lessons from the Failure of a Proposed Compulsory Insurance Scheme in Germany," Discussion Papers of DIW Berlin 620, DIW Berlin, German Institute for Economic Research.
    31. -, 2009. "The economics of climate change," Sede Subregional de la CEPAL para el Caribe (Estudios e Investigaciones) 38679, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    32. Martin Weitzman, 2007. "Structural Uncertainty and the Value of Statistical Life in the Economics of Catastrophic Climate Change," NBER Working Papers 13490, National Bureau of Economic Research, Inc.
    33. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Heuson, Clemens & Gawel, Erik & Gebhardt, Oliver & Hansjürgens, Bernd & Lehmann, Paul & Meyer, Volker & Schwarze, Reimund, 2012. "Fundamental questions on the economics of climate adaptation: Outlines of a new research programme," UFZ Reports 05/2012, Helmholtz Centre for Environmental Research (UFZ).
    2. Heuson, Clemens & Gawel, Erik & Gebhardt, Oliver & Hansjürgens, Bernd & Lehmann, Paul & Meyer, Volker & Schwarze, Reimund, 2012. "Ökonomische Grundfragen der Klimaanpassung: Umrisse eines neuen Forschungsprogramms," UFZ Reports 02/2012, Helmholtz Centre for Environmental Research (UFZ).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Daniel Osberghaus & Astrid Dannenberg & Tim Mennel & Bodo Sturm, 2010. "The Role of the Government in Adaptation to Climate Change," Environment and Planning C, , vol. 28(5), pages 834-850, October.
    2. Richard S J Tol, 2018. "The Economic Impacts of Climate Change," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 12(1), pages 4-25.
    3. Richard S. J. Tol, 2009. "The Economic Effects of Climate Change," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 29-51, Spring.
    4. Eboli, Fabio & Parrado, Ramiro & Roson, Roberto, 2010. "Climate-change feedback on economic growth: explorations with a dynamic general equilibrium model," Environment and Development Economics, Cambridge University Press, vol. 15(5), pages 515-533, October.
    5. Richard S.J. Tol, 2021. "Estimates of the social cost of carbon have not changed over time," Working Paper Series 0821, Department of Economics, University of Sussex Business School.
    6. Nicholas Stern, 2013. "The Structure of Economic Modeling of the Potential Impacts of Climate Change: Grafting Gross Underestimation of Risk onto Already Narrow Science Models," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 838-859, September.
    7. Dobes Leo & Jotzo Frank & Stern David I., 2014. "The Economics of Global Climate Change: A Historical Literature Review," Review of Economics, De Gruyter, vol. 65(3), pages 281-320, December.
    8. Tol, Richard S.J., 2013. "Targets for global climate policy: An overview," Journal of Economic Dynamics and Control, Elsevier, vol. 37(5), pages 911-928.
    9. Winchester Niven & Paltsev Sergey & Reilly John M, 2011. "Will Border Carbon Adjustments Work?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-29, January.
    10. Joseph G. Haubrich & Joseph A. Ritter, 1996. "Dynamic commitment and imperfect policy rules," Working Papers (Old Series) 9601, Federal Reserve Bank of Cleveland.
    11. Stéphane Hallegatte & Fanny Henriet & Jan Corfee-Morlot, 2011. "The economics of climate change impacts and policy benefits at city scale: a conceptual framework," Climatic Change, Springer, vol. 104(1), pages 51-87, January.
    12. Richard S. J. Tol, 2021. "Estimates of the social cost of carbon have increased over time," Papers 2105.03656, arXiv.org, revised Aug 2022.
    13. Céline Grislain-Letrémy, 2018. "Natural Disasters: Exposure and Underinsurance," Annals of Economics and Statistics, GENES, issue 129, pages 53-83.
    14. Heuson, Clemens & Gawel, Erik & Gebhardt, Oliver & Hansjürgens, Bernd & Lehmann, Paul & Meyer, Volker & Schwarze, Reimund, 2012. "Ökonomische Grundfragen der Klimaanpassung: Umrisse eines neuen Forschungsprogramms," UFZ Reports 02/2012, Helmholtz Centre for Environmental Research (UFZ).
    15. Heuson, Clemens & Gawel, Erik & Gebhardt, Oliver & Hansjürgens, Bernd & Lehmann, Paul & Meyer, Volker & Schwarze, Reimund, 2012. "Fundamental questions on the economics of climate adaptation: Outlines of a new research programme," UFZ Reports 05/2012, Helmholtz Centre for Environmental Research (UFZ).
    16. Richard S.J. Tol, 2016. "Dangerous Interference With The Climate System: An Economic Assessment," Working Paper Series 10016, Department of Economics, University of Sussex Business School.
    17. Joseph G. Haubrich & Joseph A. Ritter, 1996. "Commitment as investment under uncertainty," Working Papers (Old Series) 9606, Federal Reserve Bank of Cleveland.
    18. Marko Korhonen & Suvi Kangasrääsiö & Rauli Svento, 2017. "Climate change and mortality: Evidence from 23 developed countries between 1960 and 2010," Proceedings of International Academic Conferences 5107635, International Institute of Social and Economic Sciences.
    19. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2014. "What Do We Learn from the Weather? The New Climate-Economy Literature," Journal of Economic Literature, American Economic Association, vol. 52(3), pages 740-798, September.
    20. Matthias Schmidt & Hermann Held & Elmar Kriegler & Alexander Lorenz, 2013. "Climate Policy Under Uncertain and Heterogeneous Climate Damages," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 54(1), pages 79-99, January.

    More about this item

    Keywords

    Climate change; adaptation; market failure; insurance;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:zewdip:09057. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/zemande.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.