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Getting Real about Adapting to Climate Change: Using ‘Real Options’ to Address the Uncertainties

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  • Leo Dobes

Abstract

Scientists predict that some climate change is already inevitable, even if greenhouse emissions are stabilised. Adaptation strategies will be of comparable importance to reducing emissions. However, the specific effects of climate change are currently unknowable, especially at the local level. Given this uncertainty, deterministic adaptation strategies are inappropriate. Rather than building ‘worst-case scenario’ sea walls, for example, strong foundations can be laid — so that walls can be built (or not built) in future to match actual climatic conditions without incurring unnecessary upfront expense. Other examples of such ‘real options’ are provided to illustrate the feasibility of the approach.

Suggested Citation

  • 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.
    • Handle: RePEc:acb:agenda:v:15:y:2008:i:3:p:55-72
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    File URL: http://press-files.anu.edu.au/downloads/press/p87771/pdf/15-3-AR-1.pdf
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    Citations

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    Cited by:

    1. Sanderson, Todd & Ahmadi-Esfahani, Fredoun Z., 2010. "Climate change and Australia’s comparative advantage in broadacre agriculture," 2010 Conference, August 26-27, 2010, Nelson, New Zealand 96493, New Zealand Agricultural and Resource Economics Society.
    2. Dobes, Leo, 2012. "Adaptation to Climate Change: Formulating Policy under Uncertainty," Working Papers 249390, Australian National University, Centre for Climate Economics & Policy.
    3. Andrew Macintosh, 2013. "Coastal climate hazards and urban planning: how planning responses can lead to maladaptation," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 18(7), pages 1035-1055, October.
    4. Leo Dobes, 2010. "Notes on Applying 'Real Options' to Climate Change Adaptation Measures, with Examples from Vietnam," CCEP Working Papers 0710, Centre for Climate & Energy Policy, Crawford School of Public Policy, The Australian National University.
    5. Dobes, Leo, 2009. "People versus planners: Social Preferences for Adaptation to Climate Change," Research Reports 94890, Australian National University, Environmental Economics Research Hub.
    6. 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.
    7. World Bank, 2011. "Climate Change and Fiscal Policy : A Report for APEC," World Bank Publications - Reports 2734, The World Bank Group.
    8. Bryan M. Maybee & Daniel J. Packey, 2014. "The Effect of the Inclusion of Uncertainty on the Optimal Allocation of Resources to Climate Change Mitigation and Adaptation Programmes," Economic Papers, The Economic Society of Australia, vol. 33(1), pages 67-75, March.
    9. Decker, Christopher, 2018. "Utility and regulatory decision-making under conditions of uncertainty: Balancing resilience and affordability," Utilities Policy, Elsevier, vol. 51(C), pages 51-60.
    10. Todd Sanderson & Fredoun Z. Ahmadi‐Esfahani, 2009. "Testing Comparative Advantage in Australian Broadacre Agriculture Under Climate Change: Theoretical and Empirical Models," Economic Papers, The Economic Society of Australia, vol. 28(4), pages 346-354, December.

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