Storms, investor decisions, and the economic impacts of sea level rise

Abstract

Past research on the economic impacts of a climate-induced sea level rise has been based on the gradual erosion of the shoreline, and human adaptation. Erosion which is accelerated by sea level rise may also increase the vulnerability to storm damage by decreasing the distance between the shore and structures, and by eroding protective coastal features (dunes). We present methods of assessing this storm damage in coastal regions where structural protection is not pursued. Starting from the bounding cases of no foresight and perfect foresight of Yohe et al. (1996), we use a disaggregated analysis which models the random nature of storms, and models market valuation and private investor decisions dynamically. Using data from the National Flood Insurance Program and a hypothetical community, we estimate that although the total storm damage can be large, the increase in storm damage attributable to sea level rise is small (<5% of total sea level rise damages). These damages, however, could become more significant under other reasonable assumptions or where dune erosion increases storm damage.