Conference Agenda
Overview and details of the sessions of this conference. Please select a date or location to show only sessions at that day or location. Please select a single session for detailed view (with abstracts and downloads if available).
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Daily Overview |
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Climate Change Adaptation 2 Location: B004 Session Chair: Carolina Bonardi Pellizzari, University of Padua | |
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Budgets in high water? Fiscal implications of flood adaptation in the United Kingdom 1: Wegener Center for Climate and Global Change, University of Graz, Austria; 2: Institute of Economics, University of Graz, Austria; 3: Paul Watkiss Associates, Oxford, UK Climate change poses substantial fiscal challenges for governments, driven by increasing damages and adaptation costs. While the benefits of timely, public adaptation are well established, the question of financing these measures remains underexplored. This paper addresses this gap for flood adaptation in the United Kingdom. Using a multi-sectoral CGE model, we analyse how different public financing mechanisms affect fiscal sustainability and economic welfare. Analysed financing mechanisms include (i) shifts in public expenditures maintaining budget neutrality, and (ii) deficit financing via domestic green bonds or (iii) via international bonds. We find that adaptation moderates economic losses and fiscal consequences from flooding, despite considerable upfront investment costs. However, the extent of positive effects depends on the financing mechanism and time horizon, as well as future lending conditions, captured by different interest rates. Domestic bond financing comes at the cost of suppressing private investments, while budget-neutral financing requires cuts in public consumption. Debt financing allows for higher public consumption, but in the long run, this effect is counteracted by interest payments on accumulating public debt. The results demonstrate that, while adaptation improves long-term welfare, fiscal outcomes depend on the chosen financing mechanism and time frame. Improving expectations on future lending conditions can lead to better financing decisions. | |