Adaptation decisions and damage costs under uncertainty in an empirical general equilibrium framework

Mitigation measures are a priority to avoid irreversible damages to the environment due to climate change. However, additional adaptation efforts will be required to reduce the adverse impacts of projected climate change. While mitigation is more likely to be a global effort, adaptation measures can be implemented on a national or a regional scale, providing sufficient implementation time and more topographical flexibility. An ex-ante assessment of adaptation strategies is necessary. However, it is still methodologically abstract how to deal with uncertainties in future impacts and the intensity of climate change in economic modeling. The paper addresses decision rules for the implementation of adaptation measures under uncertainty within the framework of a general equilibrium model. I study extreme flood hazards in Switzerland, which are likely to become more frequent as a function of uncertain climate change. Employing a computational general equilibrium (CGE) model, stochastic flood damages and related adaptation decisions will be simulated. Uncertainty is of general interest for the CGE modeling community, thus, showing the modeling method will be another focus. The damage costs caused by flooding will be estimated, considering the long-term economic developments and the impact of climate change. Through the project, I aim to show how the uncertain shocks that are caused by floods can be introduced into a CGE model and also to gain a better understanding of the economic nature of different adaptation options for climate change.