Climate Change Adaptation and Compensation

Chapter 5 in "Research Handbook On Climate Change Adaptation Law", Jonathan Verschuuren, Edward Elgar, 2013, 456 pp.

17 Pages Posted: 24 Dec 2014

See all articles by Michael G. Faure

Michael G. Faure

University of Maastricht - Faculty of Law, Metro; Erasmus University Rotterdam (EUR) - Erasmus School of Law

Date Written: December 22, 2014

Abstract

This chapter focuses on one particular aspect of adaptation to climate change, being the fact that climate change can create large losses. The paper addresses the question how compensation for those losses can be generated. After sketching a few general principles the paper addresses the pros and cons of different compensation mechanisms, in turn the role of liability rules, first party insurance, a compensation fund, direct compensation by government and reinsurance by government are discussed. The paper argues that the desirability of adequate compensation for climate change related damage cannot be ignored, given the potentially catastrophic nature of climate change related damage. The paper argues strongly in favour of an optimal use of first party insurance, eventually in combination with an intervention of government as reinsurer of last resort (in order to deal with catastrophic losses). The paper argues against direct compensation by government since that may create negative incentives for prevention.

Keywords: adaptation, flooding, climate change, liability rules, tort law, compensation, first party insurance, government intervention, reinsurance

JEL Classification: K13, K32

Suggested Citation

Faure, Michael G., Climate Change Adaptation and Compensation (December 22, 2014). Chapter 5 in "Research Handbook On Climate Change Adaptation Law", Jonathan Verschuuren, Edward Elgar, 2013, 456 pp.. Available at SSRN: https://ssrn.com/abstract=2541637 or http://dx.doi.org/10.2139/ssrn.2541637

Michael G. Faure (Contact Author)

University of Maastricht - Faculty of Law, Metro ( email )

PO Box 616
Maastricht, 6200 MD
Netherlands
+31 - 43 - 388 30 60 (Phone)
+31 - 43 - 325 90 91 (Fax)

HOME PAGE: http://www.michaelfaure.be

Erasmus University Rotterdam (EUR) - Erasmus School of Law ( email )

3000 DR Rotterdam
Netherlands

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