Conference Agenda

Many studies have evaluated climate adaptation as a major strategy to reduce the potential negative economic impacts of climate change induced disasters, focusing primarily on property damage. However, averting stock losses is not the only measure of benefits of adaptation; it is also important to consider reducing the loss of the flow of goods and services stemming from property damage, typically measured in terms of loss of net revenues or GDP. These losses begin when the disaster strikes and continue until damaged property is restored. This paper presents a formal model of optimal economic recovery from disasters for the individual firm as a lower bound estimate of flow losses, blending aspects of climate change economics and the economics of disasters. The paper combines important objectives, background considerations and functional relationships in an optimal control theory approach to analyze how investment in repair and reconstruction (R&R) reduces disaster flow losses in the assessment of the benefits of adaptation measures such as the construction of seawalls, installation of storm shutters, or enhanced vegetation management practices. R&R can be facilitated and enhanced by tactics that accelerate the pace and lower the cost of that investment. We refer to these tactics as dynamic economic resilience, which promotes the efficient allocation of resources over time. We distinguish two classes of tactics: those that hasten the implementation of the investment and those that and lower its cost. Tactics to accomplish the former include speeding up the removal of debris, insurance payments, and applying for public assistance. Tactics to accomplish the latter include shortening the gestation period for reconstruction activity and improving the efficiency of the repair/reconstruction effort. The results yield insights into optimizing behavior, trade-offs, and recovery time-paths with and without dynamic economic resilience.