A regional benefit-cost analysis of heatwave climate resilience technologies in Korea

Climate resilience is crucial for reducing heatwave damages, leading the Korean government to deploy various response technologies such as rooftop/wall greening, cool roofs, cooling fogs, and pergolas. However, few studies have comprehensively evaluated the economic benefits and costs of these technologies. To fill this gap, this paper utilizes a panel datasetincluding weather data (daily temperature, relative humidity), wages, industry-specific worker counts, and regional installations of heat mitigation technologiesto estimate labor productivity losses due to heatwaves. A two-step regression analysis is then implemented (i) to assess the impact of these technologies on the Heatwave Resilience Index (HWRI) and (ii) to examine how the HWRI is associated with heatwave damages, measured as the sum of labor productivity losses and heat-related medical expenditures. Finally, a benefit-cost ratio (BCR) analysis evaluates the economic benefits of such climate resilience processes. The results show that the loss of labor productivity in Korea due to heatwaves from 2016 to 2022 is about KRW 265.1 billion, or 0.18% of total wage payments. The BCR for cooling fogs is 0.80, that for cool roofs is 1.66, that for rooftop/wall greening is 2.60, and that for pergolas is 0.86. The contributions of this paper are summarized as follows: (i) construction of an original panel dataset we constructed and (ii) a two-step estimation strategy that incorporates both the climate resilience index and mitigation technologies for estimating their reduction in damage costs related to heatwaves. Our analysis is expected to provide useful information to policymakers to establish cost-effective heatwave response technologies.