Real Option Analysis And Climate Change

This book sets out to reframe the theory of real options so that it can be used to support environmental investments for climate change adaptation and mitigation. Climate change policy often involves making decisions that concern extended time periods, and doing so under considerable uncertainty. By expanding and broadening the framework of real options, this book first introduces readers to new ways of quantifying investment decisions that can much more effectively address the shape and size of the uncertainty than traditional approaches using Net Present Value. In turn, the second part of the book applies this new theoretical framework to climate change policy by presenting a number of examples, and by providing a general perspective on investment decisions related to climate change and how to prioritize them.

Climate change represents an increasing threat to the continued development of the people, preservation of ecosystems, and economic growth of Asia and the Pacific. Mainstreaming climate risk management in all aspects of development is thus key to an effective transition to climate-resilient development pathways. ADB's climate risk management framework aims to reduce risks resulting from climate change to investment projects in Asia and the Pacific. A key step in this framework is the technical and economic valuation of climate-proofing measures. This report describes the conduct of the cost-benefit analysis of climate proofing investment projects. An important message is that the presence of uncertainty about climate change does not invalidate the conduct of the economic analysis of investment projects, nor does it require a new type of economic analysis. However, the presence of uncertainty does require a different type of decision-making process in which technical and economic expertise combine to present decision makers with the best possible information on the economic efficiency of alternative designs of investment projects.

This publication sets out the challenge for freshwater in a changing climate and provides policy guidance on how to navigate this new "waterscape". It examines the range and complexity of possible changes in the water cycle and the challenges of making practical, on-site adaptation decisions for water. It offers policymakers a risk-based framework and guidance to "know", "cap" and "manage" water risks in order to provide flexibility and improve decisions despite the lack of reliable predictions. It draws insights from a stock take of current policy efforts to adapt water systems across all 34 member countries and the European Union, including water-related aspects of National Adaptation Plans and Strategies, specific policy measures, and financing programmes. Finally, the report examines the use of economic instruments to promote adaptation (e.g. insurance schemes, water markets and banks, water pricing), incentives for ‘green’ infrastructure and ecosystem-based approaches, and financing issues.

Climate change poses a risk to business operations and to markets, and a poor business response to this risk can lead to reputational damage, or worse. At the same time, climate change can bring opportunities for some businesses. In this addition to Gower’s series of Short Guides to Business Risk, Professor Arnell, one of the world’s leading experts in the field, reviews this critical area of risk posed to businesses and other organisations by climate change and considers how they can respond to this threat. A Short Guide to Climate Change Risk focuses on the impacts and consequences of climate change rather than on business use of energy or business and 'sustainability' issues. The author examines the advantages and disadvantages of different approaches to addressing these risks, with international case study examples. With chapters on the nature, science and politics of climate change, on the assessment and management of climate change risks, and recommendations for incorporating climate change risks into a Company Risk Management System, this concise guide serves the needs of business students and practitioners across a wide range of sectors, public and private.

This publication sets out the challenge for freshwater in a changing climate and provides policy guidance on how to navigate this new "waterscape".

Decision-makers in business and economics face a staggering array of problems. For example, managers of growing firms have to decide when to expand their business, governments have to decide whether to undertake large infrastructure investments, and managers of oil firms must decide how rapidly to deplete their reserves. While these problems seem quite diverse, they all share many important features. In each case, the decision-maker must choose when to take a particular action that will be potentially impossible to reverse, and the consequences of taking (or not taking) that action are uncertain. Also, the timing and nature of these actions directly affect the cash flows generated by the entities they manage. This book explains how techniques originally developed to price financial derivatives can be used to analyze real-world decisions, and provides the tools necessary to put them into practice. The real options analysis approach to decision-making is built on strong theoretical foundations, and is widely discussed in practitioner literature, but often only at a fairly intuitive level. What practitioners need-and what this book delivers-is a structured approach to systematically applying real options analysis to the wide variety of problems they will meet in business and economics. Real Options in Theory and Practice focuses on building up a general approach to solving real options problems from the ground up. Rather than aiming to build a "black box" to solve a small set of standardized real options problems, it describes the building blocks of any successful real options analysis and shows how they can be assembled in a way that is appropriate to the problem being analyzed. For both practitioners and academics, Real Options in Theory and Practice will serve as an authoritative and invaluable resource for those looking for effective and practical solutions to complex, real-life problems.

This report addresses the fundamental challenges that climate change poses to infrastructure owners, who face two major challenges. First, they must ensure continued asset performance under sometimes significantly modified climate conditions that may decrease the present value of their networks ...

The book provides an overview of climate change-sensitive water resources management with consideration of adaptation approaches, the assessment of climate change impacts, current contemporary management techniques, and ecological responses. Comprehensive assessments and studies from eight countries using innovative approaches that aid water management under evolving climates are documented. Topics ranging from hydrologic design to management and policy responses to climate change are discussed, which demonstrate updated theories that highlight methods, tools, and experiences on the topic of water resources under climate change. The generic approaches discussed, and their applications to different climate change-related problems, make this book appealing to a global readership. The practical and applied methodologies presented in the book and through insightful case studies discussed will provide readers worldwide with ready-to-use information to manage water resources sustainably under evolving climate. This book is ideally suited for water resource managers, scientists, professionals from water management agencies, graduate students, and national laboratory agencies responsible for water and environmental management.