The Critical Role of Markets in Climate Change Adaptation

Abstract

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.

Ostrom, Floods and Mismatched Property Rights

“…With a comparison, social groups like families and associates create particular property regimes, where rights to access and use are communal and group-rules apply to the management of specific resources. Our claim is that the higherlevel presence of markets and price systems grants information that is essential for the choices individuals face when setting up their internal governance regimes (S. E. Anderson et al 2019). At various levels, the presence of a price system is crucial for individuals engaging in bottom-up proprietary arrangements.…”

“…Leonard and Reagan (2019) show how, under a system where natural resources like water rights, wildlife or timber can be purchased, conservation groups can not only reveal, but act upon existing societal preferences for non-use and non-extractive management of these resources. S. E. Anderson et al (2019) find that governance of natural resources adapts more strongly to the consequences of climate change when subject to relatively unencumbered price mechanisms. Within urban, coastal, and agricultural land markets, the presence of price mechanisms provides effective signals of the emerging costs of climate change.…”

“…Having made these arguments, we show how this perspective resonates with the experience and contemporary challenges of flood management in Britain. In this way, we contribute to situating commons institutions into the 'new governance' research agenda, where various scholars have outlined how novel governance structures, often based on contracting and public-private partnerships, lead to the successful control of landscapes and natural resources (S. E. Anderson et al 2019;Bradshaw and Lueck 2015;Bradshaw Schulz 2013;Epstein 2016;Fennell 2011;Leonard and Regan 2019;Libecap et al 2018;Lifshitz 2015). Moreover, we show how the emergence of better performing governance structures can be made more probable when market prices, representing needs and scarcities throughout a society, are accessible to local decision-makers.…”

The Inequities of National Adaptation to Climate Change

“…Self-interest should elicit efficient private adaptation, but the public good features of joint adaptation require government intervention to achieve efficient joint adaptation. Fankhauser et al, [34], Mendelsohn [35,36], Hanemann [37], and Anderson et al [38] have considered the roles of markets and governments in adaptation, by distinguishing private from joint adaptation. Examples of the latter include water supply, coastal protection, public health, weather forecasts, and ecosystem preservation.…”

Ilmastonmuutokseen sopeutumisen ohjauskeinot, kustannukset ja alueelliset ulottuvuudet

“…Julkiset toimet on kuitenkin suunniteltava siten, että ne tuottavat kustannustehokkaita ratkaisuja (Chambwera et al 2014). Markkinoilla muodostuviin hintoihin vaikuttavat julkiset toimet voivat myös vähentää oikea-aikaisen ja tehokkaan sopeutumisen kannalta arvokasta hintoihin heijastuvaa informaatiota ilmastonmuutoksen vaikutuksista (Anderson et al 2019).…”