The principal-agent problem and climate change adaptation on public lands |
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| Institution: | 1. Florida Atlantic University, College of Business, Boca Raton, FL 33431, United States;2. University of Missouri, Trulaske College of Business, Columbia, MO 65201, United States;3. Nanyang Technological University, Nanyang Business School, Singapore 639798, Singapore;1. Chair of Environmental Economics, Brandenburg University of Technology Cottbus-Senftenberg, Postbox 101344, D-03013 Cottbus, Germany;2. Institute for World Forestry, University of Hamburg, Leuschnerstr. 91, 21031 Hamburg, Germany;3. Institute of Botany and Landscape Ecology, Greifswald University, Soldmannstraße 15, 17489 Greifswald, Germany;1. Faculty of Forestry, University of Toronto, 33 Willcocks Street, Toronto, ON M5S 3B3, Canada;2. Centre of Forestry, Environmental and Resources Policy, Renmin University of China, 59 Zhongguancun Avenue, Beijing 100872, China |
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| Abstract: | Climate change presents clear risks to natural resources, which carry potential economic costs. The limited nature of physical, financial, human and natural resources means that governments, as managers of natural resources, must make careful decisions regarding trade-offs and the potential future value of investments in climate change adaptation. This paper presents cost-benefit analysis of scenarios to characterise economic benefits of adaptation from the perspective of a public institution (the provincial government) and private agents (forest licensees). The example provided is the context of assisted migration strategies for regenerating forests that are currently being implemented in British Columbia to reduce future impacts of climate change on forests. The analysis revealed positive net present value of public investment in assisted migration across all scenarios under a range of conditions; however, private sector agents face disincentives to adopt these strategies. Uncertainty about how the costs, benefits and risks associated with climate change impacts will be distributed among public institutions and private actors influences incentives to adapt to climate change (the “principal-agent problem”) and further complicates adaptation. Absent development of risk-sharing mechanisms or re-alignment of incentives, uptake of assisted migration strategies by private agents is likely to be limited, creating longer-term risks for public institutions. Analyzing incentives and disincentives facing principals and agents using a well-known tool (cost-benefit analysis) can help decision-makers to identify and address underlying barriers to climate change adaptation in the context of public lands management. |
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| Keywords: | Assisted migration Climate change Adaptation Forestry Principal-agent problem |
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