Climate change uncertainty: building flexibility into water and flood risk infrastructure
AbstractInfrastructure for water, urban drainage and flood protection has a typical lifetime of 30–200 years and its continuing performance is very sensitive to climate change. Investment decisions for such systems are frequently based on state-of-the-art impact assessments using a specified climate change scenario in order to identify a singular optimal adaptive strategy. In a non-stationary world, however, it is risky and/or uneconomic to plan for just one climate change scenario as an average or best estimate, as is done with the use of the Predict-Then-Adapt method. We argue that responsible adaptation requires an alternative method that effectively allows for the lack of knowledge about future climate change by adopting a managed/adaptive strategy. The managed/adaptive strategy confers the ability, derived from built-in flexibility, to adjust to future uncertainties as they unfold. This will restrict the effect of erroneous decisions and help avoid maladaptation. Real In Options (RIO) analysis can facilitate the development of an optimal managed/adaptive strategy to climate change. Here, we show the economic benefits of adopting a managed/adaptive strategy and building in flexibility, using RIO analysis applied for the first time to urban drainage infrastructure. Copyright Springer Science+Business Media B.V. 2013
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Springer in its journal Climatic Change.
Volume (Year): 116 (2013)
Issue (Month): 2 (January)
Contact details of provider:
Web page: http://www.springer.com/economics/journal/10584
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F Baum).
If references are entirely missing, you can add them using this form.