RP0278 – Public finance and climate change adaptation: could adaptation policies foster public fiscal sustainability? The case of Italy

12/2015
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This paper analyses the link between adaptation investment against flooding and how it affects the public budget and its sustainability in the medium run. In particular, this assessment addresses the issue of how investing in climate change adaptation is sustainable for the public finance and how climate change related investment could foster economic growth and lowers public fiscal indicators, such as deficit/GDP and debt/GDP ratios. This preliminary work considers the case of Italy where flood risk is particularly high combined with a high level of deficit which is often considered as one of the limiting factor against new investment. Using a CGE model, we argue that introducing adaptation investments has a positive effect on fiscal indicators respect to an “inaction” scenario. Moreover, the positive effect is even higher when these adaptation investments are anticipatory.

  • jel: C68, H54, H68
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  • Keywords: Computable general equilibrium, public investment, adaptation, deficit, debt

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