Physical Sciences and Mathematics Commons^™

Protecting Energy Infrastructure Against The Uncertainty Of Future Climate Change: A Real Options Approach, Thomas Prime, Karyn Morrissey, Jennifer M. Brown, Andrew J. Plater

Journal of Ocean and Coastal Economics

The coastal impacts of climate change, including flooding and erosion due to storms and sea-level rise, and the possible adaptation responses have been studied using very different approaches; from very detailed site-specific, process-based investigations and interventions to global macroeconomic assessments of coastal zone vulnerability. This paper presents a flood defense real option analysis methodology that values potential investment decisions made in the building and maintaining of flood defenses around electricity infrastructure at local spatial scales for a large region. Real option analysis embraces uncertainty in future climate conditions and flexibility in the management of investment projects to produce a more …