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Adaptation to Climate Change: Formulating Policy under Uncertainty

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Listed:
  • Leo Dobes

    () (Crawford School of Public Policy, The Australian National University)

Abstract

Economists were able to formulate and recommend policy approaches for reducing emissions of greenhouse gases (mitigation) by drawing on an existing body of economic theory related to externalities. However, no comparably straightforward approach has yet emerged in the adaptation literature, possibly due to the diffuse nature of climatic effects that may occur in very diverse geographical locations. By acknowledging that the hallmark of future climate change effects is uncertainty, rather than readily identifiable and deterministic outcomes, it is possible to formulate coherent policy approaches. Recognising that there are differing degrees of uncertainty is a key aspect to making policy formulation more realistic.

Suggested Citation

  • Leo Dobes, 2012. "Adaptation to Climate Change: Formulating Policy under Uncertainty," CCEP Working Papers 1201, Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:ccepwp:1201
    as

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    File URL: http://ccep.anu.edu.au/data/2012/pdf/wpaper/CCEP1201Dobes.pdf
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    References listed on IDEAS

    as
    1. Dobes, Leo, 2010. "Notes on applying ‘real options’ to climate change adaptation measures, with examples from Vietnam," Working Papers 249384, Australian National University, Centre for Climate Economics & Policy.
    2. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474, November.
    3. Hendrik Wolff & Howard Chong & Maximilian Auffhammer, 2011. "Classification, Detection and Consequences of Data Error: Evidence from the Human Development Index," Economic Journal, Royal Economic Society, vol. 121(553), pages 843-870, June.
    4. Quiggin, John, 2005. "Economists and Uncertainty," Risk and Sustainable Management Group Working Papers 151169, University of Queensland, School of Economics.
    5. Davis, Graham A., 1996. "Real options: Managerial flexibility and strategy in resource allocation : Lenos Trigeorgis The MIT Press, Cambridge, MA, 1996, xiii + 427 pp. (hardcover), ISBN 0-262-20102-X," Resources Policy, Elsevier, vol. 22(3), pages 218-220, September.
    6. Leo Dobes, 2008. "Getting Real about Adapting to Climate Change: Using ‘Real Options’ to Address the Uncertainties," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 15(3), pages 55-72.
    7. Adam Borison, 2005. "Real Options Analysis: Where Are the Emperor's Clothes?," Journal of Applied Corporate Finance, Morgan Stanley, vol. 17(2), pages 17-31.
    8. Kunreuther, Howard C. & Michel-Kerjan, Erwann O., 2011. "At War with the Weather: Managing Large-Scale Risks in a New Era of Catastrophes," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262516543, October.
    9. Leo Dobes, 2009. "People versus planners: Social Preferences for Adaptation to Climate Change," Environmental Economics Research Hub Research Reports 0941, Environmental Economics Research Hub, Crawford School of Public Policy, The Australian National University.
    10. Randall,Alan, 2011. "Risk and Precaution," Cambridge Books, Cambridge University Press, number 9780521759199, December.
    11. Roxana Julia & Faye Duchin, 2005. "World Trade as the Adjustment Mechanism of Agriculture to Climate Change," Rensselaer Working Papers in Economics 0507, Rensselaer Polytechnic Institute, Department of Economics.
    12. Richard T. Woodward & Richard C. Bishop, 1997. "How to Decide When Experts Disagree: Uncertainty-Based Choice Rules in Environmental Policy," Land Economics, University of Wisconsin Press, vol. 73(4), pages 492-507.
    13. Dobes, Leo, 2009. "Adapting More Cleverly To Climate Change By Using ‘Real Options’ To Address The Uncertainties," 2009 Conference (53rd), February 11-13, 2009, Cairns, Australia 47615, Australian Agricultural and Resource Economics Society.
    14. Randall,Alan, 2011. "Risk and Precaution," Cambridge Books, Cambridge University Press, number 9780521766159, December.
    15. Ian J. Bateman & Richard T. Carson & Brett Day & Michael Hanemann & Nick Hanley & Tannis Hett & Michael Jones-Lee & Graham Loomes, 2002. "Economic Valuation with Stated Preference Techniques," Books, Edward Elgar Publishing, number 2639.
    16. Leo Dobes & Jeff Bennett, 2009. "Multi-Criteria Analysis: "Good Enough" for Government Work?," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 16(3), pages 7-30.
    17. Stéphane Hallegatte & Philippe Ambrosi & Jean Charles Hourcade, 2007. "Using Climate Analogues for Assessing Climate Change Economic Impacts in Urban Areas," Post-Print hal-00164627, HAL.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Climate Change Adaptation in Pacific island countries: Donors, Big Men, Real Options
      by Matthew Dornan in Development Policy Blog on 2012-02-01 01:00:17
    2. Top Three Crawford Working Papers in March 2012
      by David Stern in Stochastic Trend on 2012-04-02 15:14:00
    3. Crawford School Working Papers in January 2012
      by David Stern in Stochastic Trend on 2012-02-03 00:03:00

    More about this item

    Keywords

    adaptation; climate change; risk; uncertainty; unknown unknowns;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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