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The authors thank the Koret Foundation for funding a conference on climate change adaptation through market responses at the Hoover Institution, Stanford. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. At least one co-author has disclosed a financial relationship of potential relevance for this research. Further information is available online at http://www.nber.org/papers/w24645.ack NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Markets, especially land markets, can facilitate climate change adaptation through price signals. A review of research reveals that urban, coastal, and agricultural land markets provide effective signals of the emerging costs of climate change. These signals encourage adjustments by both private owners and policy officials in taking preemptive action to reduce costs. In agriculture, they promote consideration of new cropping and tillage practices, seed types, timing, and location of production. They also stimulate use of new irrigation technologies. In urban areas, they motivate new housing construction, elevation, and location away from harm. They channel more efficient use of water and its application to parks and other green areas to make urban settings more desirable with higher temperatures. Related water markets play a similar role in adjusting water use and reallocation. To be effective, however, markets must reflect multiple traders and prices must be free to adjust. Where these conditions are not met, market signals will be inhibited and market-driven adaptation will be reduced. Because public policy is driven by constituent demands, it may not be a remedy. The evidence of the National Flood Insurance Program and federal wildfire response illustrates how politically difficult it may be to adjust programs to be more adaptive.

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Nuclear power—a source of low-carbon electricity—is exposed to increasing risks from climate change. Intensifying storms, droughts, extreme precipitation, wildfires, higher temperatures, and sea-level rise threaten supply disruptions and facility damage. Approximately 64 percent of installed capacity commenced operation between thirty and forty-eight years ago, before climate change was considered in plant design or construction. Globally, 516 million people reside within a fifty mile (80 km) radius of at least one operating nuclear power plant, and 20 million reside within a ten mile (16 km) radius, and could face health and safety risks resulting from an extreme event induced by climate change. Roughly 41 percent of nuclear power plants operate near seacoasts, making them vulnerable to increasing storm intensity and sea-level rise. Inland plants face exposure to other climate risks, such as increasingly severe wildfires and warmer water temperatures. No entity has responsibility for conducting risk assessments that adequately evaluate the climate vulnerabilities of nuclear power and the subsequent threats to international energy security, the environment, and human health. A comprehensive risk assessment by international agencies and the development of national and international standards is necessary to mitigate risks for new and existing plants.