, Volume 48, Issue 2-3, pp 317-342

Storms, Investor Decisions, and the Economic Impacts of Sea Level Rise

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Abstract

Past research on the economic impacts of aclimate-induced sea level rise has been based on thegradual erosion of the shoreline, and humanadaptation. Erosion which is accelerated by sea levelrise may also increase the vulnerability to stormdamage by decreasing the distance between the shoreand structures, and by eroding protective coastalfeatures (dunes). We present methods of assessingthis storm damage in coastal regions where structuralprotection is not pursued. Starting from the boundingcases of no foresight and perfectforesight of Yohe et al. (1996), we use adisaggregated analysis which models the random natureof storms, and models market valuation and privateinvestor decisions dynamically. Using data from theNational Flood Insurance Program and a hypotheticalcommunity, we estimate that although the total stormdamage can be large, the increase in storm damageattributable to sea level rise is small (<5% oftotal sea level rise damages). These damages,however, could become more significant under otherreasonable assumptions or where dune erosion increasesstorm damage.