The added value of real options analysis for climate change adaptation
Bibliographic Data
| ID | 12929448 |
|---|---|
| Authors | Anita Wreford (0000-0002-9546-4080, Lincoln University, corresponding author), Ruth Dittrich (0000-0002-0854-2870, University of Portland), Thomas van der Pol (0000-0001-6095-5130, Global Climate Forum) |
| Year | 2020 |
| Volume | 11 |
| Issue | 3 |
| Publication date | 2020-03-04 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | Wiley Interdisciplinary Reviews Climate Change (JOURNAL) |
| Journal identifiers | ISSN: 1757-7780 • E-ISSN: 1757-7799 |
| Publisher | Wiley (PUBLISHER • GB) |
| DOI | 10.1002/wcc.642 |
| OpenAlex | W3010196877 |
| Language | EN |
| Citations received | 3 |
| References cited | 41 |
Climate change adaptation investment decisions can be made more efficiently if uncertainty and new information are considered in their economic appraisal. Real options analysis (ROA) is a robust decision‐making tool that allows for the incorporation of both uncertainty and new information. In this opinion article, we argue that ROA is a valuable tool, providing the analysis is designed to reflect the real‐world characteristics of the decision context. We highlight the differences between traditional risk‐based ROA, and scenario‐based ROA, and discuss the relative merits of the approaches from the perspective of their assumptions and use of climate information. We also emphasize the need for increased co‐development of ROA design and applications with end‐users. Given the large climate uncertainties for long‐term adaptation planning, we suggest that an emerging strand of scenario‐based ROA methods offers ways to help identify and conditionally value flexibility without aggregating values into precise expected values across states of the world. This article is categorized under: Climate Economics > Iterative Risk‐Management Policy Portfolios
Adaptation (eye · Business · Climate change · Context (archaeology · Economics · Flexibility (engineering · Geography · Investment (military · Investment Decisions · Microeconomics · Operations research · Political science · Risk analysis (engineering · Value (mathematics · Capital Investment and Risk Analysis · Climate Change Policy and Economics · Computer Science · Economic and Environmental Valuation · Mathematics
Investment under Uncertainty
Defining Uncertainty
Robust adaptation to climate change
Storylines
Probabilistic 21st and 22nd century sea‐level projections at a global network of tide‐gauge sites
Agreeing on Robust Decisions
Understanding risks in the light of uncertainty
A survey of decision-making approaches for climate change adaptation
Assessing sea level rise costs and adaptation benefits under uncertainty in Greece
Strategies to adapt to an uncertain climate change
Dynamic adaptive policy pathways
The Economic Value of Climate Information in Adaptation Decisions
The Pricing of Options and Corporate Liabilities
Buying real options – Valuing uncertainty in infrastructure planning
How smart can government be? Exploring barriers to the adoption of smart government
| Unique citing works | 3 |
|---|---|
| Citations per year | 0,6 |
| Citation span | 2021 - 2023 (3) |
| Citation velocity | historical |
| Highly cited | No |
| Citation types | Neutral: 3 |