Abstract:The purpose of this paper was to project changes in climate change-induced risks over time and to investigate policy alternatives to mitigate the risks from increases in sea level, heavy rains, and heat waves in urban and rural areas. System dynamics simulation was used to build a model and conduct policy analysis for a simulation period over the years 2000-2050. The model was built with a focus on the interaction among three factors: damage restoration costs from heavy rains, heat waves, and sea level rise; the total cost of food imports due to decreases in arable land and agricultural productivity; and changes in the government budget to respond to climate change problems. A policy experiment was conducted with the model under four scenarios mainly based on the government budget for climate change. The results indicated, firstly, that the climate budget needs to be increased to at least 13 trillion Korean Won (US $11.6 billion) per year. Secondly, an earlier budget increase would more effectively reduce the total disaster restoration cost than a delayed budget increase. Third, if an earlier budget increase is difficult, the next best alternative would be to allocate a greater fraction of the climate budget to urban rather than to rural areas. Lastly, an early response to climate change would more effectively reduce food import costs, maintain agricultural productivity, and improve infrastructure for climate change adaptation than a delayed response. In conclusion, an earlier increase in the climate change budget would be more effective than a delayed budget increase of the same amount, and allocating a larger fraction of the climate budget to urban areas could be more cost-effective than increasing the budget, if urban and rural parties could agree on the method of allocation.

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This study analyzes how climate change affects the economy, society, and environment in South Korea. Then, the study explores the ways to strengthen capabilities that can alleviate climate change impacts. To find them, the study employs a system dynamics simulation method and builds a model with several sectors including the urban, rural, population, and social-environmental sectors. The study compares the size of climate change damages in rural and urban areas. The results with representative concentration path (RCP) 8.5 show that the size of climate change damage will continue to increase by 2050. The projected damages from the reduced industrial outputs in urban areas will be larger than that in rural areas. The results also show that the service sector will face stronger impacts from climate change than the manufacturing and agricultural sectors. However, the total size of damage in the rural areas will be bigger than that of the urban areas. It is because the size of reduced industrial outputs per capita in the rural areas is twice bigger than that of the urban areas. The climate change damage in the social and environmental sectors (including a loss of biodiversity and an increase in health costs) account for the largest part of the total damage. The study finally provides suggestions and policies that can improve the capabilities to reduce the climate change damages. One of the major suggestions of this study is that the increase in the climate change budget corresponding to the GDP growth can minimize the size of climate change impacts.

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