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A primer on the building economics of climate change

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  • Viggo Nordvik
  • Kim Robert Lisø

Abstract

Climate change will entail new conditions for the construction industry. Knowledge about the implications of climate change on the built environment will be of the utmost importance to the industry in years to come. A building is a 'long lasting' durable asset that is changed over time due to exogenously imposed strains and by actions. The built environment has an expected lifetime varying from 60 to more than 100 years. Hence, the building economics of climate change should be treated within a dynamic analytical framework that explicitly allows for changes in the information sets over time. The building stock of the future consists of the building stock of today and of new construction. In the future, parts of the present building stock will be adapted to changes in the environment, while some parts will be kept as they are. Analysis of how building stock is affected by future climate change should handle this diversity. This can be done through the use of a putty-clay model. Uncertainty of what kind of climate regimes will prevail in the future enhances the profitability of actions that increase future flexibility. Hence, the real option approach to building economics is utilized.

Suggested Citation

  • Viggo Nordvik & Kim Robert Lisø, 2004. "A primer on the building economics of climate change," Construction Management and Economics, Taylor & Francis Journals, vol. 22(7), pages 765-775.
    • Handle: RePEc:taf:conmgt:v:22:y:2004:i:7:p:765-775
    DOI: 10.1080/0144619042000213256
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    References listed on IDEAS

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    1. Michael Rothschild & Joseph Stiglitz, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(4), pages 629-649.
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    Cited by:

    1. Dobes Leo & Jotzo Frank & Stern David I., 2014. "The Economics of Global Climate Change: A Historical Literature Review," Review of Economics, De Gruyter, vol. 65(3), pages 281-320, December.
    2. 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.

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