The Economics of Climate Change

How much are we willing to pay to live on the coast?

Potters Pond: Photo Courtesy Meredith Haas

To any economist things are typically broken down into “tradeoffs.” What will I give up and what will I get in return? At least that’s what Robert Johnston, an economics expert from Clark University, said at the Coastal State Discussion Series on February 25, sponsored by Rhode Island Sea Grant, at the University of Rhode Island’s Kingston campus.

Robert Johnston, economics expert from Clark University, talks about environmental services intrinsic to economies.

Robert Johnston, economics expert from Clark University, talks about environmental services intrinsic to economies.

Johnston discussed various ongoing research efforts to look more specifically at the tradeoffs of coastal management in New England communities, and the potential costs associated with climate change. He said we can’t think about hazard adaptation in a box and isolate it from all the other management tradeoffs, noting that some of the key tradeoffs will be related to coastal development regulations.

“What are you going to do about all of the houses on the coast?” he asked. “How are you going to regulate development along with ecosystem services, like beaches people use for recreational purposes?”

There are property rights and equity concerns in play, but at the heart of Johnston’s talk was: What are people willing to pay to protect their homes or the ecological services provided by healthy habitats, such as clean water and storm buffers?

There are social gains and losses, he said, describing how every management scenario has its benefits and drawbacks. But what he’s interested in is “non-market” values.
“These are the things we don’t buy at the store,” Johnston said, referring to the benefits of having a beach or wetland. Those things can be hard to measure since their values aren’t reflected in the markets but highly influence people’s decisions.

The biggest challenge, Johnston said, is balancing development interests with a healthy environment. “Areas that are most valuable for their ecological services are where most people want to live,” he said.

Those areas, however, are sensitive to development that can disrupt highly valued services. Wetlands, for example, filter runoff, prevent erosion through stabilizing vegetation and reduce flooding by absorbing water. Removing these systems through development takes away those services.

To evaluate management tradeoffs, Johnston said, three things need to be considered:

• What are the ecological services?
• Which services will change if the land changes?
• What are the benefits and costs of these changes?

“We found some unexpected patterns,” he said. For example, Johnston discussed a project in Maine that looked at coastal development and coastal riparian restoration efforts. While policymakers assumed home protection to be the highest concern for residents, it turned out that people were willing to pay the most for increased law enforcement and regulations on private property to protect habitat quality.

“We found people were willing to pay for setback regulations, which is very different from what policymakers assumed,” he said.

Johnston’s survey method uses choice models, which can predict what percentage of people will vote for various policy choices within 1 percentile. Based on his methods, policymakers can make decisions that generate maximum support.

Understanding what people will support by finding out where their values lie is part of the process, as is educational efforts to help people make connections to ecological services.

“What drives towns? It’s not what you think,” Johnston said. “If you talk to people, it’s not their homes. It’s the access to natural areas, like beaches.”

He noted that sometimes the link between development and the environment is missed. When someone cuts down trees for a better view they’re not always making the connection that those trees are valuable to maintaining wetlands, which in turn filter our water, act as nurseries and habitat for fish, and provide protection against erosion and flooding.

“Ecological measures are not always obviously linked to what people care about,” Johnston said.

Flooding and storms are big threats for many southern New England communities that have densely packed, historical waterfronts. Some are at greater risk than others, and the impacts of building a seawall, for example, aren’t so readily obvious to non-ecologists, Johnston said.

Other concerns with living on the water include high flood insurance rates, which concern some homeowners more than the actual flooding of their homes. And these values may differ between homeowners who are primary residences vs. secondary/vacation homeowners.

It’s about quantifying attitudes and characterizing how people understand the context of coastal changes and policy, according to Johnston.

“Most management and adaptation decisions are made with little information regarding economic consequences,” he said. “Much of the information cited in the media is incomplete and expectations of policymakers are sometimes incorrect.”

Johnston is currently studying economic tradeoffs and values for coastal adaptation in both Waterford and Old Saybrook, Conn., as well as looking at property value and tax-base impacts of coastal vulnerability and adaptation throughout New England.