This was part of Assessing the Economic and Environmental Consequences of Climate Change

Mitigating Disaster Risks in the Age of Climate Change

Harrison Hong, Columbia University

Friday, March 31, 2023

Abstract: Emissions abatement alone cannot address the consequences of global warming for frequency of weather disasters. We model regional-level adaptation to mitigate disaster risks to capital stock. Optimal adaptation---a mix of private efforts and public spending funded by a tax on capital---depends on learning regarding the adverse consequences of global warming from disaster arrivals. We apply our model to country-level control of flooding from major tropical cyclones. Learning is needed to rationalize new findings on the response of asset prices to disaster arrivals. The value of adaptation with learning is much higher than under the counterfactual without learning. Finally, we quantify how learning and adaptation alters projections for the social cost of carbon over time.