Ep. 31, Preparing for a Changing Climate Conference (2024)

Introduction and Overview of the Conference

• The Preparing for a Changing Climate Conference was recently held at Stanford University, focusing on climate adaptation and featuring researchers from around the world studying adaptation to help prepare for the changing climate (32s).
• Climate change is a significant problem, and while mitigation efforts are crucial, the best science suggests that 2 to 3 degrees Celsius of warming is likely to occur over the next century, making adaptation essential (1m18s).
• The conference aimed to cast a wide net for researchers studying adaptation and figure out what works to help protect human society from the rapidly changing climate (1m47s).
• A junior student, Samuel M benacre, found the conference fascinating, particularly the discussions on how climate change affects finance, housing markets, and other fields, which was a surprise to him as he is used to discussing climate issues with people from the scientific side (2m21s).

Impact and Effectiveness of Government Programs

• Professor Saul Shang was surprised by the magnitude of effects found in some papers, including one on small business loans from the Federal Government after natural disasters, which had an impressive return on investment (3m19s).
• The analysis of the effectiveness of government programs, such as the small business loans, has the potential to dramatically impact the government's approach to disaster recovery and climate adaptation (4m2s).
• The conference highlighted the importance of adaptation efforts, as the current 1 degree Celsius warming has already shown that societies are unprepared for the climate change that has occurred so far (1m31s).

The Importance of Adaptation and the Role of Current Students

• The changes discussed at the conference are expected to unfold over the lifetime of current students, such as Samuel M benacre, making it essential to address climate adaptation and prepare for the changing climate (2m3s).

Studies on Disaster Recovery and Access to Credit

• The government can support businesses in disaster-stricken areas by providing short-term loans to help them rebuild, which has a significant impact on their survival and increases their chances of getting private sector loans in the future (4m7s).
• Research has shown that access to credit in the wake of a disaster can be beneficial for disaster recovery, citing a study on small business loans in the US (5m57s).
• A study in the Philippines found that government-supplied credit did not have a significant effect on disaster recovery, which was a surprise given the positive results of other studies (6m8s).
• The null result in the Philippines study may be due to loan officers discouraging women from taking on more debt, highlighting the need for education and clear implementation goals (6m42s).
• The study in the Philippines involved an experiment with an NGO giving out loans to evaluate the effectiveness of access to credit in disaster recovery (5m40s).
• The study's findings suggest that having a government program is not enough, and that education and implementation are crucial for the success of such initiatives (7m5s).

The Role of Information in Market Function and Adaptation

• The discussion highlights the importance of understanding the context and deployment of different instruments in adapting to climate change (7m38s).
• The study in the Philippines focused on gender-based loans, which was of particular interest due to its relevance to climate mitigation in regions such as Brazil and the Amazon (5m11s).
• Adaptations to climate change are new and unfamiliar to people, and capacity building can help policies work in the future by enabling areas to take on effective policies that might work in other areas (7m55s).
• The importance of information in improving market function after a natural disaster in the context of climate change was a key topic during the conference, with numerous papers highlighting the need for people to be well-informed (8m11s).
• A paper showed that buyers need better information about flood risk, and when given this information, the market can send the right signal, resulting in houses with higher flood risks being sold at a discount (8m32s).
• In India, farmers given better seasonal forecasts of the weather during the growing season can change their behavior in ways that are profitable and lead to better household and farm-level outcomes (8m57s).
• The real estate market is being transformed by the rollout of risk assessments of every property, providing new information that can change buyer behavior and lead to discounts on houses in higher-risk areas (9m32s).
• An experimental rollout of flood risk information on real estate websites showed that houses in higher-risk areas attracted less attention and were likely to have a discount in their ultimate sale price (10m0s).
• A study on the protection of the city of Venice showed that the use of a flood protection system increased the price and rental rates of ground-floor apartments that were previously at risk of flooding (10m56s).
• From an economic perspective, having markets reflect the true value of assets, including the implications of flooding, is crucial for long-term dynamics, and when markets capture this true value, people will understand and value the benefits or harms associated with their assets (11m18s).
• When people have good information, markets can internalize these ideas, and people will make informed decisions when purchasing assets, avoiding situations like buying a "lemon house" that may flood in the future (12m12s).
• Studies have shown that markets can reflect facts about environmental impacts when people have information and infrastructure to protect them, helping to allocate resources to the right communities (12m30s).

Limits of Markets and the Issue of Externalities

• However, there are limits to what markets can do, particularly in cases of externalities, where people generate effects on others, such as the Mumbai study, which found that heavy rainfall and flooding led to human waste and increased mortality (13m9s).

Conflicts of Interest and the Need for Disclosure

• Conflicts of interest may arise in different contexts, such as in the US, where house sellers may not disclose flood risks, and research has shown that in states where disclosure is mandated, buyers are better informed (14m48s).
• Mandating disclosure of climate risk information is essential to force markets to reveal relevant information, as seen in the example of states that require sellers to disclose flood risks (15m7s).
• Real estate agencies may not always provide buyers with information about climate change risks, so government intervention may be necessary to ensure this information is shared correctly through the market (15m29s).

Market Reactions to Climate Change and Human Behavior

• The market is slowly reacting to long-term predictions of extreme climate events, but it is a complex process as housing operates in the long term (16m10s).
• A paper by Harrison Hong explored the macroeconomic effects of extreme events and found that people tend to adapt to climate change after a sequence of bad events, but become less concerned during periods with fewer extreme events (16m37s).
• People's behavior is influenced by their personal experience with extreme events, making it challenging to keep them motivated to protect themselves against climate change risks (17m40s).

Protecting People from Extreme Events and Informing about Risks

• Building codes and insurance can help protect people from extreme events, but it is also important to ensure that people are well-informed about the risks and trade-offs they are making (18m4s).
• In the US, people are moving to places that are more climate-exposed, such as the Sun Belt, due to other factors like pleasant living conditions, highlighting the need to inform people about the risks and trade-offs they are making (18m27s).
• It is essential to ensure that people are well-informed about the risks and trade-offs they are making when it comes to climate change, and there is a need to explore ways of informing them effectively (18m50s).
• Ensuring that people are informed about potential climate risks when purchasing a property is crucial, as climate can have a significant impact on other outcomes in life, including well-being and mortality (18m59s).
• Research has shown that extreme weather events, such as hurricanes and heatwaves, can have long-lasting effects on mortality, and it is essential to inform people about the magnitude of these risks (19m22s).
• Climate is often not a top priority for people when moving to a new place, as other factors like health, education, and safety are considered more important (19m50s).
• A report from Brazil found that people in the Amazon region were more concerned about health, education, and safety than the environment, highlighting the need to consider climate risks in a broader context (20m6s).

Case Studies on Resource Access and Inequality

• A study on Cape Town's "Day Zero" water crisis found that while conservation efforts were successful in reducing water use, wealthy households drilled wells in their backyards, leading to a transformation in how communities use resources (20m46s).
• This study paints a picture of a future where wealthy households may rely on privatized resources, while middle and low-income groups use public sources, highlighting potential inequalities in resource access (21m48s).
• Research has also shown that some people are not taking steps to protect themselves from climate-related risks, such as wildfires, despite being offered incentives to do so (22m20s).
• Some households were difficult to convince to take basic measures to protect themselves from higher wildfire risks, indicating a need for more innovation to understand the reasons behind this reluctance (22m36s).

Conference Outcomes and Future Directions

• A major takeaway from the conference is the excitement about the high-quality empirical work in the area of climate change research (23m6s).
• One of the conference's goals is to build a community of researchers working on climate-related topics and attract individuals who may not have originally worked on climate but realize its importance for economic outcomes (23m15s).
• The conference aims to spur new research by individuals who don't normally work on climate-related topics, which would be a huge success (23m32s).
• The conference brought together people from various fields of economics research, including macro, micro, public finance, and more, to solve the problem of climate change (23m46s).
• The quality of the conference improved significantly from the previous year, and there is anticipation for what will happen next year (24m2s).

Podcast Sponsorship

• The Stanford Initiative on Business and Environmental Sustainability podcast series is sponsored by the Stanford Graduate School of Business and the Stanford Doerr School of Sustainability (24m17s).