Adaptation to Climate Change and Climate Variability: Do It Now or Wait and See?
AbstractAs growing attention is paid to climate change adaptation as an actual policy issue, the significant meaning of climate variability in adaptation decisions is beginning to be recognized. By using a real option framework, we shed light on how climate change and climate variability affect individuals’ (farmers’) investment decisions with regard to adaptation. As a plausible case in which the delay carries policy implications, we investigate farmers’ choices when adaptation involves the use of an open-access resource (water). The results show that uncoordinated farmers with a high risk aversion may under-adapt while farmers with a low risk aversion would over-adapt under the same conditions. Private adaptation should be supported or discouraged accordingly if farmers are not convinced about the possibilities of collective resource management in the long run
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1809.
Length: 31 pages
Date of creation: Nov 2012
Date of revision:
Adaptation to climate change; climate variability; risk and uncertainty; real option; water; open-access resources;
Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
This paper has been announced in the following NEP Reports:
- NEP-AGR-2012-12-06 (Agricultural Economics)
- NEP-ALL-2012-12-06 (All new papers)
- NEP-ENV-2012-12-06 (Environmental Economics)
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