Optimal Infrastructure Adaptation to Climate Change

Considerable emphasis has been placed on designing climate change mitigation policies, both in New Zealand and internationally. This paper, while also dealing with climate change, alters the focus to adaptation policy. Adaptation is important whether or not a country adopts mitigation policies in the face of climate change.

This paper examines some of the key issues that should be taken into account when designing and implementing climate change adaptation policies with regard to infrastructure investments. To make the analysis concrete, we refer to the case of adaptation to the prospect of coastal flooding. In this case a seawall can be considered as an infrastructure investment. However, the analysis is general.

The two key lessons of the analysis for infrastructure investments are:

• to spread the nature of adaptation responses to climate change across margins that reduce the probability of an adverse event (such as a flood), the exposure given such an event, and the loss given the exposure; and
• to be cautious in committing to irreversible infrastructure investments that may no longer be optimal as our understandings of the severity and frequency of climate change outcomes are revised.