A framework for identifying climate change induced socio-economic tipping points
24 Pages Posted: 5 Oct 2021
Date Written: 23 3, 2021
Climate change may cause socio-economic tipping points (SETPs), where the state of a socio-economic system abruptly changes to a fundamentally different state. While the potential existence of SETPs is recognized, a systematic method to identify and prepare for SETPs is lacking. This study introduces a stepwise approach for identification of SETPs in order to support decision making under uncertain climate and socio-economic conditions. We show how the conditions that trigger SETPs can be discovered using narratives and exploratory modelling, and how this can inform decision making. The approach is quantitively demonstrated with a stylized case study on the collapse of house prices in a coastal city, due to increasing flood risk in the face of accelerating sea level rise. We model the effect of various dynamic adaptive management strategies in many possible futures. We find that under high-end sea level rise scenarios, tipping points in the real estate prices are likely to occur if the market responds to sudden changes in perceived flood risk rather than gradually adjusting prices to changes in flood risk in a rational manner. Such SETPs can only be avoided with a proactive strategy and when flood protection measures are implemented rapidly. Our approach can guide future studies on SETPs while seeking to move the study of SETPs as a mere system-dynamic phenomenon towards a concept that provides perspective of action for policy makers.
Keywords: tipping points, regime shifts, transformational adaptation, decision making under deep uncertainty, exploratory modelling
JEL Classification: Q54
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