The economics of efficient adaptation to sea level rise

The first economic models explaining how to adapt to sea level rise (SLR) imagined the sea was effectively a large bathtub that was slowly filling. Adaptation involved retreat for undeveloped land and slowly raising land along the outer edge of the coastline to protect valuable developed land from permanent inundation. This adaptation strategy lowered coastal damage by seven fold. Subsequent research has integrated storms into sea level rise models. With storms, the most important damage from SLR is allowing storms to reach ever further inland and destroy ever more coastal capital. The optimal strategy is still just to protect developed land and the strategy continues to lower damage by seven fold. But adaptation now involves hardened structures along the coast to protect buildings and infrastructure from intermittent storm surge. As SLR progresses, seawall heights should rise over time. The optimal strategy that maximizes expected net benefits protects against common storms. The expected benefits are rarely high enough to protect against dangerous but rare (1/100 or 1/500 year) storms. Fair insurance is the least cost way to adapt to such residual damage. Subsidized insurance and generous relief packages, however, are both maladaptations that encourage overdevelopment of risky seashores and raise overall coastal damage instead of lowering damage. In the long run, if seas continue to rise, eventually the seawalls become too high and retreat after destructive storms becomes more attractive.