Economic effects of adapting critical infrastructure
The aim of this case study is to analyze the economic impacts of climate change and adaptation on particular critical infrastructures.
Status report, October 2021
Case study 2 has investigated the economic impacts of climate change and adaptation on cer-tain critical infrastructures in Germany in the context of varied socio-economic developments using a macro-econometric model. The combination of macroeconomic modelling and the Impact Chain method provides quantitative values for the qualitative strands of the impact chains.
Climate-related hazards have the potential to cause both direct damage to critical infrastruc-ture and indirect economic damage through the failure or disruption of critical infrastructure. To assess climate risk, it is necessary to consider not only future climate change but also fu-ture socio-economic developments, which affect exposure and vulnerability to climate change and can thus increase or mitigate climate change risks. Thus, we conducted an integrated as-sessment of the combined effect of potential climate and societal changes.
Three different socioeconomic scenarios based on the Shared Socioeconomic Pathways (SSPs) were implemented on national level: a business-as-usual scenario (“trend”, SSP2), a sustaina-ble development scenario (“stability”, SSP1) and a third one as a counterpart to the sustaina-bility scenario which is derived from a dynamic socioeconomic development (“dynamic”) and most similar to SSP 5. Considered aspects in the national context are population and demo-graphic development, GDP growth, land use and developments in the field of energy, climate policy, and transportation.
The macro-econometric model PANTA RHEI has been extended to analyze the effects of cli-mate change on transport, energy and health infrastructure against the background of the three different socio-economic projections at national level. With regard to transport, this case study analyzed the climate risk of the disruption of transport routes due to heavy precip-itation and flooding. In the field of energy, the case of reduced energy generation of hard-coal-fired power plants due to limited availability of cooling water due to heat and drought were considered. Regarding health, this case study considered the risk of heat to morbidity and associated impact on health infrastructure through hospital costs. Economic effects here are more than the sum of individual climate-related damages. In addition to direct effects, indirect and induced effects are considered in the macro-econometric model in a fully inte-grated way.
The results of the macro-econometric modelling are presented using socio-economic indica-tors such as GDP so that they are comparable and can be used as decision supporting infor-mation. The quantification of climate change impacts and exemplary visualization of adapta-tion challenges with respect to three different SSP scenarios shows a possible and plausible corridor of results for different socio-economic developments to better understand and assess the impacts of different adaptation measures. This illustrates how assumptions about future socioeconomic development influence the magnitude of climate change impacts and the ef-fectiveness of adaptation measures and thus provides a meaningful risk assessment regarding the impacts of climate change on critical infrastructure.
The case study improved understanding of infrastructure effects from climate change by a more comprehensive assessment of its economic and environmental consequences. It considers the socio-economic dynamic development to provide a meaningful risk assessment regard-ing climate change impacts on critical infrastructure. The research and innovation objectives of the study were to integrate societal change and socio-economic developments in the im-pact chain framework to conduct an integrated assessment of the combined effect of poten-tial climate and societal changes and to improve the existing methodological approach of the impact chain to better integrate quantitative, qualitative and dynamic aspects and assess un-certainties. The study resulted in the following innovations:
- Linking the impact chain method to macro-economic modelling on national level
- Implementing quantified SSP scenarios at the national level
- Integrate knowledge about how societal change can affect exposure and vulnerability to the negative effects of climate change
- Providing quantitative values for the qualitative strands of the impact chains, the re-sults of are presented using socio-economic indicators such as GDP so that they are comparable and can be used as decision supporting information
Economic effects of heavy precipitation and heat waves on aspects of transport, energy and health infrastructure
Future socio-economic development for integrated assessment of future climate risks
This assessment has been carried out as stand-alone desk research.
Summary data collection
Data have been gathered through desk research of official statistics, reports and scientific papers.
Methodological improvements of the Impact Chain-based climate risk and vulnerability assessment:
- Improved integration of quantitative, qualitative and dynamic aspects through the linkage of the impact chain method to macro-economic modelling on national level
- Combination of status quo risk analysis with SSPs and ex ante simulation
- Addressing of uncertainties regarding future socioeconomic developments
Final documented output:
Linking the impact chain method with macroeconomic modelling enables the provision of quantita-tive values for the qualitative strands of the impact chains. The model calculations help to quantify the impacts of climate change on different socioeconomic developments and pro-vide a meaningful risk assessment regarding the impacts of climate change and adaptation on critical infrastructure.
- Macroeconomic effects due to disruption of road transport, temperature induced reduction in hard-coal fired electricity generation and heat-related health expendi-tures and selected adaptation measures in the context of three socio-economic scenarios (changes in production value and GDP, for the years 2030 and 2045)
- Description of the assumptions and quantifications of the three national socio-economic scenarios (trend, stability, dynamic) based on SSPs (SSP2, SSP1, SSP5)
- Description of the assumptions and quantifications of the considered climate im-pacts (to disruption of road transport, temperature induced reduction in hard-coal fired electricity generation and heat-related health expenditures) and adaptation measures
- Integrated schematic illustration of the case study-relevant impact chains based on the impact chain method including cascading effects and different socio-economic developments and adaptation
Case study responsible
Gesellschaft für Wirtschaftliche Strukturforschung (GWS)
Contribution to research questions 1 and 3
Economic impacts of climate change and adaptation under different socio-economic developments in Germany
Economic impacts of climate change and adaptation under different socio-economic developments in Germany, lessons learned