A benefit-cost analysis is performed on the decision by a small, data poor,coastal community to build a protective dike against anticipated rising sea level due to climate change. The dike decision is zero-one but its height is optimized. The paper offers asystems dynamics methodology, essentially Net Present Value, to estimate its current assets (static model). Future assets are projected to a stationary state according to current population growth (dynamic model). Current and future assets are subjected to five annual maximum water level scenarios provided by the literature, using a Gumbel distribution on water levels (calibrated on historical damage). Annual provisions for assets at risk plus the cost of building the dike are then compared to damage avoided. It is concluded that a dike (about 6 m high) should be built if the community wants to withstand the five scenarios, except the current one for the static model.
By: Philippe J. Crabbe
Emeritus Professor of Natural Resources and Environmental Economics Institute of the Environment, University of Ottawa, Ottawa, Canada