Hurricanes, climate change, and social welfare: evidence from the Caribbean
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Hurricanes, climate change, and social welfare: evidence from the Caribbean Nekeisha Spencer1 · Eric Strobl2 Received: 3 March 2020 / Accepted: 28 July 2020 / © The Author(s) 2020
Abstract We examine whether Caribbean islands will be worse off as hurricane activity alters under climate change. To this end, we construct island level damages for synthetic storm tracks generated from four climate models under current and future climate settings. Using a flexible stochastic dominance preference ordering framework, we find that the fat-tailed and uncertain nature of the distribution of storms makes it difficult to conclude that the region will be worse off under climate change, and is likely to depend on the degree of adaptation. Keywords Hurricanes · Climate change · Stochastic dominance · Social welfare
1 Introduction Tropical storms have caused over 800 USD billion in damages over the last 20 years, with 58 billion due to the 2018 season alone.1 Given the predicted increase in global temperatures due to anthropogenic influences, an obvious concern is whether such global warming will also translate into greater and/or more destructive tropical storm activity. While historical data is believed to be too limited to draw any clear conclusion in this regard (Knutson et al. 2019a), there is much more confidence in terms of making predictions from climate models. More specifically, current evidence from state-of-the-art models seems to suggest that globally the average intensity will increase by about 5%, and the proportion of higher intensity (Category 4 and 5) storms will rise 13% (see Knutson et al. 2019b), but it is not clear whether there will also be a greater frequency of tropical storms in general or the more
1 Author’s
own calculations using the EMDAT database.
Eric Strobl
[email protected] 1
University of the West Indies, Kingston, Jamaica
2
University of Bern, Bern, Switzerland
Climatic Change
intense ones. Thus, at least as current science stands, how climate change will affect tropical storms in the future remains a complex issue. The likely multifaceted changes, or lack thereof, in tropical storm activity due to climate change beg the obvious question of whether these will lead countries and regions to be worse off than under current climate. A common approach to investigate how climate change affects the welfare of current and future generations in a variety of settings is to specify a social welfare function that values consumption intertemporally, as for instance is done in the well-known Dynamic Integrated Climate-Economy model (DICE) model (Nordhaus 1993) and (Millner and McDermott 2016).2 Crucial in these welfare functions is the choice of the rate of risk aversion, measuring how society’s marginal utility changes with changes in consumption, and the social discount rate, which determines the manner in which society values current versus future consumption. Moreover, there has been a debate about the appropriate functional form of welfare itself (Pindyck 2011). However, the very nature o
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