Paying a Price of Climate Change: Who Pays for Managed Retreats?

Abstract

Managed retreats are an important climate change adaptation tool. They seek the relocation of communities when the community is exposed to undue levels of risk or will soon become exposed to high risk because of climate change. We focus on the economics of managed retreats, specifically on the question of who pays or may pay for these relocations. There is a significant body of research in the other social sciences on managed retreats, but almost none in economics. No paper we are aware of has focused primarily on the question of who pays for managed retreats. The survey here therefore focuses on lessons we can learn from the existing literature and from examples, specifically an example from Aotearoa New Zealand. Sources of funding for managed retreats can come from the affected communities, from the government or public insurers, and from the private sector. It is politically easier to implement managed retreats if it is the latter groups (public and private insurers) that pay, rather than placing the burden on the general taxpayer or on the affected communities themselves.