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Investment In Flood Protection Measures Under Climate Change Uncertainty

Author

Listed:
  • KARIANNE DE BRUIN

    (CICERO, Center for International Climate and Environmental Research, Oslo, P. O. Box 1129, N-0318 Oslo, Norway)

  • ERIK ANSINK

    (Institute of Environment Studies (IVM) and Amsterdam Global Change Institute, VU University Amsterdam, De Boelelaan 1087, 1081 HV Amsterdam, The Netherlands)

Abstract

Recent severe river flooding in Europe has triggered debates among scientists and policy-makers on future projections of flood frequency and the need for adaptive investments, such as flood protection measures. Because there exists uncertainty about the impact of climate change on flood risk, such investments require a careful analysis of expected benefits and costs. The objective of this paper is to show how climate change uncertainty affects the decision to invest in flood protection measures. We develop a model that incorporates flexible timing of investment decisions and scientific uncertainty on the extent of climate change impact. This model allows decision-makers to cope with the uncertain impact of climate change on the frequency and damage of river flood events and minimizes the risk of under- or over-investment. One of the innovative elements of our paper is that we explicitly distinguish between structural and non-structural flood protection measures. Our results show that the effects of uncertainty on the optimal initial investment depends on the cost structure of these measures which has several important implications for flood management policy.

Suggested Citation

  • Karianne De Bruin & Erik Ansink, 2011. "Investment In Flood Protection Measures Under Climate Change Uncertainty," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 2(04), pages 321-339.
    • Handle: RePEc:wsi:ccexxx:v:02:y:2011:i:04:n:s2010007811000334
    DOI: 10.1142/S2010007811000334
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    References listed on IDEAS

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    1. T. R. C. Curtin, 2009. "Climate Change and Food Production," Energy & Environment, , vol. 20(7), pages 1099-1116, November.
    2. -, 2009. "Climate change: selected economic dimensions," Sede Subregional de la CEPAL para el Caribe (Estudios e Investigaciones) 27645, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    3. Oecd, 2009. "Climate Change and Africa," OECD Journal: General Papers, OECD Publishing, vol. 2009(1), pages 5-35.
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    Cited by:

    1. Charles Sims & Sarah E. Null, 2019. "Climate Forecasts and Flood Mitigation," Southern Economic Journal, John Wiley & Sons, vol. 85(4), pages 1083-1107, April.
    2. Guthrie, Graeme, 2023. "Optimal adaptation to uncertain climate change," Journal of Economic Dynamics and Control, Elsevier, vol. 151(C).
    3. Graeme Guthrie, 2019. "Real options analysis of climate-change adaptation: investment flexibility and extreme weather events," Climatic Change, Springer, vol. 156(1), pages 231-253, September.
    4. Adam D. McCurdy & William R. Travis, 2017. "Simulated climate adaptation in stormwater systems: evaluating the efficiency of adaptation strategies," Environment Systems and Decisions, Springer, vol. 37(2), pages 214-229, June.
    5. Thomas D. Pol & Ekko C. Ierland & Silke Gabbert, 2017. "Economic analysis of adaptive strategies for flood risk management under climate change," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 22(2), pages 267-285, February.

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