Economics

This report summarizes the work of two NOAA-funded graduate fellows research on community-level coastal flood management and climate change adaptation best practices throughout the North Atlantic region (Virginia to Maine). Guided by a steering committee composed of government and academic personnel involved with climate adaptation throughout the North Atlantic, the fellows visited coastal communities to collect information on low-cost climate change and related coastal hazard management best practices. The purpose of the work was to identify and collate cost-effective adaptation projects implemented at the municipal level, to provide NOAA with best practice information to assist with ongoing adaptation outreach.

This article, jointly authored by ICF International and others, assesses the current state of knowledge on the magnitude of adaptation cost in the United States. While incomplete, the studies suggest that adaptation cost could be as high as hundreds of billions of dollars annually by mid-century.

The article also identifies key studies in each sector, surveys the cost estimates and approaches to cost estimation, and highlights methodological issues in interpreting, comparing, and aggregating adaptation cost estimates. Steps are recommended to make future adaptation cost studies more comparable within and across sectors and more accessible and relevant to policy and decision makers.

Climate change presents new challenges for the management of social-ecological systems and the ecosystem services they provide. Although the instrument of payments for ecosystem services (PES) has emerged as a promising tool to safeguard or enhance the provision of ecosystem services (ES), little attention has been paid to the potential role of PES in climate change adaptation. As an external stressor climate change has an impact on the social-ecological system in which PES takes place, including the various actors taking part in the PES scheme. Following a short description of the conceptual link between PES and adaptation to climate change, we provide practical insights into the relationship between PES and adaptation to climate change by presenting results from a case study of a rural watershed in Kenya. Drawing upon the results of a participatory vulnerability assessment among potential ecosystem service providers in Sasumua watershed north of Nairobi, we show that PES can play a role in enhancing adaptation to climate change by influencing certain elements of adaptive capacity and incentivizing adaptation measures. In addition, trade-offs and synergies between proposed measures under PES and adaptation to climate change are identified. Results show that although it may not be possible to establish PES schemes based on water utilities as the sole source of financing, embedding PES in a wider adaptation framework creates an opportunity for the development of watershed PES schemes in Africa and ensures their sustainability. We conclude that there is a need to embed PES in a wider institutional framework and that extra financial resources are needed to foster greater integration between PES and adaptation to climate change. This can be achieved through scaling up PES by bringing in other buyers and additional ecosystem services. PES can achieve important coadaptation benefits, but for more effective adaptation outcomes it needs to be combined with vulnerability assessments and climate scenarios to ensure that these are realized and potential trade-offs between PES measures and adaptation measures minimized.

This Economic Guide provides a standard economic methodology for evaluating investment decisions aimed to improve the ability of communities to adapt to, withstand, and quickly recover from disruptive events. The Economic Guide is designed for use in conjunction with the NIST Community Resilience Planning Guide for Buildings and Infrastructure Systems, which provides a methodology for communities to develop long-term plans by engaging stakeholders, establishing performance goals for buildings and infrastructure systems, and developing an implementation strategy, by providing a mechanism to prioritize and determine the efficiency of resilience actions. The methodology described in this report frames the economic decision process by identifying and comparing the relevant present and future streams of costs and benefits—the latter realized through cost savings and damage loss avoidance—associated with new capital investment into resilience to those future streams generated by the status-quo. Topics related to non-market values and uncertainty are also explored. This report provides context for increasing resilience capacity through focusing on those investments that target key social goals and objectives, and providing selection criteria that ensure reduction of risks as well as increases in resilience. Furthermore, the methodological approach aims to enable the built environment to be utilized more efficiently in terms of loss reduction during recovery and to enable faster and more efficient recovery in the face of future disasters.

Public Private Partnerships (P3s) have the potential to help many communities optimize their limited resources through agreements with private parties to help build and maintain their public infrastructure. P3s have successfully designed, built, and maintained many types of public infrastructure, such as roads, and drinking water/wastewater utilities across the U.S. Until recently, there have been no P3s specifically developed for stormwater management or Clean Water Act requirements. The U.S. Environmental Protection Agency (EPA) Region 3 Water Protection Division (WPD) has been researching, benchmarking, and evaluating P3s for their potential adaptation and use in the Chesapeake Bay region. On December 6, 2012, the EPA Region 3 WPD hosted a P3 Experts Roundtable in Philadelphia, PA (U.S. EPA, 2013a). The goal of the P3 Roundtable was to provide a forum for a targeted group of private sector representatives to discuss in detail the feasibility, practicality, and benefits of using P3s to assist jurisdictions in the finance, design, construction, and O&M of an urban stormwater retrofit program. The results of this Roundtable are the foundation and approach for applying a stormwater P3 model across the Chesapeake Bay watershed.

This guide will provide communities with an opportunity to review the capacity and potential to develop a P3 program to help “close the gap” between current resources and the funding that will be required to meet stormwater regulatory commitments and community stormwater management needs. In addition, this guide and the tools presented are a continuing effort, commitment, and partnership between EPA Region 3 and communities in the Chesapeake Bay region. We believe it will help to raise the bar and further advance the restoration goals and objectives for the Chesapeake Bay.

Climate change is considered by many to be a complex, crosscutting issue that poses risks to many environmental and economic systems and presents a significant financial risk to the federal government. According to the National Research Council (NRC), although the exact details cannot be predicted with certainty, there is clear scientific understanding that climate change poses serious risks to human society and many of the physical and ecological systems upon which society depends.1 According to the United States Global Change Research Program (USGCRP), among other reported impacts, climate change could threaten coastal areas with rising sea levels, alter agricultural productivity, and increase the costs of severe weather events as these once “rare” events potentially become more common and intense due to climate change.

These impacts call attention to areas where government-wide action is needed to reduce fiscal exposure, because, among other roles, the federal government (1) leads a strategic plan that coordinates federal efforts and also informs state, local, and private-sector action; (2) owns or operates extensive infrastructure vulnerable to climate impacts, such as defense facilities and federal property; (3) insures property and crops vulnerable to climate effects; (4) provides data and technical assistance to federal, state, local, and private-sector decision makers responsible for managing the impacts of climate change on their activities; and (5) provides disaster relief aid. As a result, we added Limiting the Federal Government's Fiscal Exposure by Better Managing Climate Change Risks to the High-Risk List in 2013.

Since 1988, EPA’s Clean Water State Revolving Fund (CWSRF) has established itself as an important source of affordable funding for infrastructure projects that improve and maintain the quality of our nation’s waters. Each of the 51 programs operating independently across the United States and Puerto Rico demonstrate the power of federal and state partnerships to leverage financial resources in the interest of building sustainable infrastructure and protecting public health and water quality. There is no single prescription for accomplishing these goals; infrastructure solutions must be tailored to meet the environmental and economic needs of individual communities. States have significant flexibility within the CWSRF to establish their own funding priorities, assist communities of all sizes, and address a wide range of water quality concerns.

This best practices guide illustrates a variety of incentives states use to encourage consideration and implementation of green infrastructure and foster sustainability within their programs. Some of the incentives and examples featured in the guide are not specific to green infrastructure, but could easily be adapted to focus on green infrastructure implementation. Likewise, many of the practices that are specific to green infrastructure can also be applied to other sustainable projects such as water and energy efficiency. State programs have used the practices in this guide with great success. EPA is pleased to highlight these efforts in the hope that other interested programs can follow their example.