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The New Jersey Supreme Court Discovers Ecosystem Services, Just in Time for Climate Change

Valuing ecosystem services—the streams of benefits functioning ecosystems provide to human populations—has become a powerful theme in natural resources management research and policy, but not so much yet in hard law to apply. The problem has not been with the ecosystem services that are obvious and well registered in markets—crops, recreation, timber, and water supply to name a few. We have plenty of law surrounding services like those. Rather, ecosystem services such as groundwater recharge by wetlands, storm surge protection by coastal dunes, and pollination by wild honeybees are not bought and sold in markets and thus suffer from a classic Tragedy of the Commons dilemma. People get that these are valuable benefits in a big picture sense, but incorporating these values in law—whether in protective regulations, performance standards, incentives, or in core principles of property law—has proven difficult. Yet with climate change looming as a threat to property in general—increased flooding, drought, storm surges, and other threats are not far into the future—it seems that there would be some urgency to incorporating ecosystem services ideas into property law.

One big step in that direction has come from a recent decision by the New Jersey Supreme Court regarding how much compensation beachfront owners are due when the state plops sand dunes on their property. See Borough of Harvey Cedars v. Karan, 70 Atlantic Rep. 524 (NJ 2013). Like many states, New Jersey (with federal help) spends considerable money shoring up the shore, so to speak, by importing sand to beaches subject to erosion. Sometimes these projects go further, in the form of constructing massive dunes on the beach to, in the court’s words, “serve as a barrier-wall, protecting homes and businesses…from the destructive fury of the ocean.” In other words, the idea is to create or supplement the dune ecosystem to enhance the flow of one very valuable ecosystem service—stopping storm surges. And after Hurricane Sandy, there’s not a person in New Jersey who doesn’t get that.

Well, maybe there are a few. There’s another ecosystem services that’s pretty valuable to beachfront owners—their view of the beach! You can see the problem already—higher dunes mean less view. So when the federal, state, and local governments embarked on a dune project in Long Beach Island, some property owners resisted. The project involved purchasing perpetual easements from the beachfront owners and constructing a 22-foot dune system the length of the beach. The local borough was more than willing to provide compensation for the easement, and most property owners were happy to have the dunes. One couple, however, decided not to sell. The borough exercised its power of eminent domain and took the easement from them anyway. Things got interesting when it came time to decide how much “just compensation” was due to the property owners.

This situation involves what is called a “partial taking” of property. If the borough had taken title to the entire property, the owners and the government would have argued over the fair market value of the entire parcel, which while contestable is fairly easy to determine within a reasonable range the same way appraisers estimate home values for loans. It’s trickier when the government is taking only part of the property (in this case the easement), because one has to determine the value of what was taken as well as the impact on the value of what remains. For over a century, New Jersey law allowed the government to offset the losses to the property owners for that “remainder” (in this case the diminished view) with the benefits the owners receive from the public project that required the partial taking (in this case the protection from the ocean), but only if the benefits were “special benefits” the owner received independent of the “general benefits” the project provides to the public at large. At the trial level in the case, the trial court ruled that the protection benefits from the dune project were general benefits, which meant the jury could not include them as offsets. Under that approach, the jury awarded the owners $375,000, and the appellate court affirmed. As is easy to imagine, if the government had to pay every beachfront owner a sum like that–and there were a lot of owners who refused to participate in the project–the project would have been dead in the water (no pun intended). (Note: I’m going to stay away from the part of the story involving public vilification of the recalcitrant owners, like when Governor Christie called them “knuckleheads.”)

The New Jersey Supreme court turned the case into an opportunity to ditch the outdated special benefits/general benefits doctrine. After a very careful review of the history and policy of the doctrine, the court concluded that “the terms special and general benefits do more to obscure than illuminate the basic principles governing the computation of just compensation in eminent domain cases.” Instead, the court ruled, “just compensation should be based on non-conjectural and quantifiable benefits, benefits that are capable of reasonable calculation at the time of the taking.”

From there the court made some rather obvious but refreshing observations about the dune project, as in “without the dune, the probability of serious damage or destruction to the [owners’] property increased dramatically over a thirty-year period,” and thus it is “likely that a rational purchaser would place a value on a protective barrier that shielded his property form partial or total destruction.” Seriously, this is not rocket science—if you want your house standing in 30 years, deal with the dunes!

The court sent the case back to the trial court with instructions that “at that trial, the Borough will have the opportunity to present evidence of any non-speculative, reasonably calculable benefits that inured to the advantage of the [owners’] property at the time of the taking.” In other words, calculate the value of the ecosystem services the dunes provide to beachfront owners. That trial never took place, however, because the parties settled – the borough paid the owners one dollar in compensation (and covered $24,000 of their attorneys fees). One can reasonably assume the property owners saw the writing on the wall.

The Karan case is a huge development for the law of ecosystem services. Not only did the court recognize the inherent value of the dunes, it gave that value firm legal status. One can anticipate many public infrastructure projects in the future as part of climate change adaptation, many of which will require use of or impacts to private property. As with the Long Beach Island dune project, one can hope that many of these infrastructure projects will rely on restoration, enhancement, or creation of natural ecosystems such as dunes, wetlands, and riparian habitat. Certainly just compensation will be due to the property owners, but at least in New Jersey the calculation of just compensation will include recognition of and valuation of the ecosystem services provided by those ecosystem-based projects.

Building Scenarios of Legal Futures

Legal futurism relies on developing robust scenarios of the future to test possible legal developments and outcomes. A recent article in Futures, A Review of Scenario Planning, defines scenarios as “a set of hypothetical events set in the future constructed to clarify a possible chain of causal events as well as their decision points.” Three main principles go into good scenario planning:

  • Identification of predetermined elements in the relevant business or policy environment that will drive and direct future outcomes
  • Developing a macroscopic view that pushes people to explore the relevant environment over a wider area than they normally would
  • A willingness to change mindsets in order to re-perceive reality

There are numerous techniques used in scenario planning, but generally they fall into two categories. Descriptive scenarios are extrapolative exercises designed to present a range of future likely alternative events. Normative scenarios are more goal directed and are designed to assist in implementing desired policy objectives. The primary focus of legal futurism is on building descriptive scenarios of the legal environment in order to test normative scenarios of legal responses. Developing legal futurism scenarios thus will involve a blend of non-legal and legal futures.

Climate change adaptation provides an obvious medium for this kind of scenario planning. Climate change presents a host of different impacts on public and private interests (the descriptive scenarios), and how public and private entities respond will depend in large part on their respective policy goal alternatives (the normative scenarios). For example, the interaction of sea level rise and storm intensity could play out over several different scenarios for a region, and possible policy responses include to “defend” the shoreline built environment with more infrastructure or to “retreat” from the increased threats by shifting land use development inland. Legal futurism combines these two interacting scenario sets to explore the likelihood of different legal developments, such as whether an aggressive retreat strategy might lead to public regulations triggering takings liability.

An excellent example of this kind of exercise is found in Dan Tarlock‘s recent article in the Vermont Law Review, Takings, Water Rights, and Climate Change. Tarlock combines descriptive scenarios of climate change with normative scenarios of policy responses to explore how takings law might apply to futures ranging from “sea-level rise inundates private property and the state asserts that the land is now subject to the public trust” to the state ordering “the diversion of water from entitlement holders to mitigate adverse climate-change impacts.”  His analysis, which bears down how takings jurisprudence encourages moral hazard problems, reveals the usefulness of scenario building not only for anticipating and planning future legal developments, but also for gaining insight about existing legal doctrine. Thinking about how law might work in future scenarios, in other words, tells us something–perhaps a lot in some cases–about how it is working now.

Can Governments Be Held Liable for Failure to Adapt to Climate Change?

Looking into the future of climate change adaptation, meeting the twin climate change adaptation policy goals of reducing vulnerability and increasing resilience is difficult to envision without vast infusions of new and retrofitted infrastructure designed with adaptation in mind. A “defend the coast” strategy for a coastal jurisdiction facing sea level rise, for example, is likely to require coastal armoring and road improvements, and a retreat strategy necessarily requires new infrastructure to support displaced populations.  Private and public investment in climate change adaptation infrastructure is likely to be extensive, and it is as likely that it will fail in some instances due to design defects and poor operating decisions. Given it is intended to reduce vulnerability and increase resilience, failure of adaptation infrastructure could have dire consequences for communities. If that happens, who will be liable? And what if government entities provide no adaptation infrastructure in the first place? The law of public infrastructure liability is likely to undergo intense pressure as questions like these are increasingly put in play. (more…)

How Will Climate Change Change Law? An Exercise in Legal Futurism

A rapidly growing number of legal academics and practitioners around the world are engaging in one of the largest legal futurism exercises ever endeavored–thinking about how the impacts of climate change and human responses to them will change law.  Climate change presents a future of continuing changes across a wide spectrum of climate variables, everywhere, over an indefinite time horizon, with some changes producing conditions never before experienced by human civilizations. How fast and in what directions legal change might evolve under this “no-analog” future is difficult to say at this time given the uncertainty surrounding the pace and course of climate change, but many climate change scenarios have in common a number of projected impacts relevant to law. Obvious legal pressure points stemming from such impacts include rising sea levels, which will present questions of property ownership and protection along the coast, and shifting precipitation and snowmelt patterns, which will put further strain on water rights doctrine. Indeed, adaptation to these and other climate change impacts will likely spawn its own set of legal issues, as human migration and vast infusions of new infrastructure could trigger disputes over land use, environmental, and civil rights policies. Suffice it to say that it is difficult to envision a world in which adapting to climate change does not in some significant ways require the attention of legal institutions and adjustments to legislation, regulations, and common law doctrine. (more…)

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