Paying a Price of Climate Change: Who Pays for Managed Retreats?

Abstract

Managed retreats are an important climate change adaptation tool. They seek the relocation of communities due to perceptions that they are already exposed to undue levels of risk or will become exposed to high risk in the near future because of climate change. Here, we focus on the economics of managed retreats and specifically focus on the question of who pays or may pay for these relocations. There is a significant body of research in the other social sciences (political science, sociology, anthropology, history) on managed retreats, but almost none in economics. No paper that we are aware has focused primarily on the question of who pays for managed retreats, and the survey here therefore focusses on lessons we can learn from examples, specifically an example from New Zealand and from the little references to these questions in the existing literature. Sources of funding for managed retreats can come from the affected communities, from the public sector (the government or public insurers), and from the private sector (mostly private insurers). It is politically easier to implement managed retreats if it is the latter groups (public and private insurers) that pay, rather than placing the burden on the general taxpayer or on the affected communities themselves.