Economic costs of climate change: Flood risks in the Susquehanna

limate change is likely to increase risks of flooding because of the consequent more intense hydrological cycle, which increases the probability and magnitude of precipitation. However, economic costs of increased flood risks have not been fully investigated. The focus of this research is on an assessment of increased flood risks and the resulting economic costs that may occur with projected increases in precipitation in the Susquehanna River Basin.;This research uses a system of rainfall-runoff equations to project the possible effects of climate change on future flood risks based on the downscaling results of changes in precipitation and temperature from climate models. Economic costs of increased flood risks are estimated by using ex ante welfare measures rather than ex post expected damage approaches because of the uncertainty involved. Specifically, the economic costs are estimated by using households' willingness-to-pay (WTP) to avoid increases in flood risks through the Random Utility Model (RUM) that involves housing choices. A two-level Nested Logit Model is applied for the estimation. The estimation of WTP is determined by the utility functions and affected by public flood protection projects and private purchases of flood insurance. For the households that are risk-averse, the utility function is nonlinear in income and a simulation process is used to approximate the mean WTPs.;Estimation results of increases in flood risks show that annual flood risks increase between 23% and 55% in terms of flood frequency and between 5% and 32% in terms of flood severity. The estimated annual mean WTPs to avoid increases in flood risks without additional flood protection range from...