Adaptation to Climate Change in the Transport Sector

Abstract

In this study, we review the literature on climate change adaptation measures in the transport sector. Many of the measures proposed are rather conceptual and far from concrete, probably due to the fact that climate change effects on transport are either unknown or highly uncertain. Given the limited information on the potential magnitude of climate damages and the various uncertainties involved, postponement of adaptation investments may well be the most sensible strategy at the moment, especially when investments are substantial and irreversible. Furthermore, monitoring of relevant climatic changes and ongoing research into climate change effects are important elements of a pro-active adaptation strategy. Irreversible decisions, such as the ones on spatial organization, likely require a more active strategy, e.g. in the form of making spatial reservations. We further discuss the interdependency between optimal mitigation and adaptation, an issue that is often overlooked in the literature. Finally, most operators and governmental bodies are not used to dealing with risk and uncertainty, and generally base their decisions on single risk values only, likely leading to under- or overinvestment. We discuss several relevant topics in this area and highlight methods that can be used to better deal with these issues.

JEL Classification :

• D81
• R40
• R41
• Q54

Acknowledgements

This research is supported through the “TRANSUMO (Transition Sustainable Mobility)” research programme and the “Knowledge for Climate” research programme. We owe thanks to three anonymous reviewers whose comments and suggestions have led to substantial improvements in the paper.

Notes

An overview of possible mitigation measures in the transport sector is provided in Chapman (2007).

Damage costs will occur later in time than adaptation costs, implying that a discount factor will have to be applied to make the two cost figures comparable. Without loss of generality we assume in this example that discounting has taken place and that costs hold for the same year.

Note that equality of marginal mitigation costs of marginal costs of adaptation and damages in point E, does not mean that mitigation and adaptation and damage costs are equal in this point.

Risk and uncertainty are terms that may have several meanings, and in most studies it is not always clear which. We follow he definitions originally used by Knight (1921). Situations with risk are those where outcomes are unknown but probability distributions on outcomes are known. Situations with uncertainty are those where both outcomes and probability distributions on outcomes are unknown.

In the literature the lag between GHG concentration and climatic changes is often referred to as the climate change commitment, i.e. the global warming that would occur if concentrations were kept at the year 2000 levels (e.g. Wigley, 2005). See Van Vuuren et al. (2008) for a discussion on why current estimates of climate change commitment are likely conservative.

One might also argue that lack of timely adaptation reduces traffic safety leading to more casualties. Although this appears to be an irreversibility, this is not entirely convincing from an economics perspective. The point is that what is valued in the economic approach is essentially not the life of a specific person, but the change in probability for residents to be affected by an accident (De Blaeij, Florax, Rietveld, & Verhoef, 2003). So what is valued is not life as such, but a change in risk level, which makes the notion of irreversibility less applicable since the costs of adaptation to return to the initial risk level are probably not extremely large. Note that it is not uncommon that travellers trade-off differences in risk levels against differences in costs (for example a flight with an expensive but reliable airline versus a flight with a cheap airline with unknown safety reputation). It is exactly on such private trade-offs of consumers that the valuation of risks in social cost benefit analysis of measures to deal with climate change is based. The use of a value of statistical life (VOSL) is standard in cost benefit analysis of measures that affect safety in transport, not just in the context of adaptation. As explained by Van Wee (2011), the use of VOSL to address risks in transport is consistent with some ethical theories, though not all of them.

Climate change may remain, at least to a certain extent, unpredictable, especially when long prediction horizons are used. For adaptation this is, however, less likely and also less problematic than for mitigation. In the extreme case that waiting does not solve the decision problem about adaptation investment there is always the option of waiting until actual climatic changes are revealed before making investment decisions.

Various software packages are available that allow for calculating real option values. For example, Anda et al. (2009) use the software package Real Option Analysis Toolkit 2.1.

For other interesting approaches to deal with uncertainty and the timing of adaptation investment, see Peterson (2006), Mastrandrea and Schneider (2004), Hobbs (1997), Hobbs et al. (1997), and Gu, Crawfor, Peiris, and Jefferies (1994).