Open Access

INVESTMENT IN FLOOD PROTECTION MEASURES UNDER CLIMATE CHANGE UNCERTAINTY

CICERO, Center for International Climate and Environmental Research, Oslo, P. O. Box 1129, N-0318 Oslo, Norway

Corresponding author.

and

Institute of Environment Studies (IVM) and Amsterdam Global Change Institute, VU University Amsterdam, De Boelelaan 1087, 1081 HV Amsterdam, The Netherlands

Search for more papers by this author

https://doi.org/10.1142/S2010007811000334Cited by:14 (Source: Crossref)

Abstract

Recent severe river flooding in Europe has triggered debates among scientists and policy-makers on future projections of flood frequency and the need for adaptive investments, such as flood protection measures. Because there exists uncertainty about the impact of climate change on flood risk, such investments require a careful analysis of expected benefits and costs. The objective of this paper is to show how climate change uncertainty affects the decision to invest in flood protection measures. We develop a model that incorporates flexible timing of investment decisions and scientific uncertainty on the extent of climate change impact. This model allows decision-makers to cope with the uncertain impact of climate change on the frequency and damage of river flood events and minimizes the risk of under- or over-investment. One of the innovative elements of our paper is that we explicitly distinguish between structural and non-structural flood protection measures. Our results show that the effects of uncertainty on the optimal initial investment depends on the cost structure of these measures which has several important implications for flood management policy.

We thank an anonymous reviewer, Jetske Bouma and Marjolein Mens for their useful comments on this manuscript.

Keywords:

References

A. Becker and U. Grünewald, Science 300(5622), 1099 (2003). Crossref, Google Scholar
R. Brouwer and R. Van Ek, Ecological Economics 50(2), 1 (2004). Crossref, Google Scholar
J. H. Christensen and O. B. Christensen, Nature 421(6925), 805 (2003). Crossref, Google Scholar
K. De Bruinet al., Climatic Change 95(2), 23 (2009). Crossref, Google Scholar
De Bruin, K (2011). An economic analysis of adaptation to climate change under uncertainty. PhD dissertation, Wageningen University, The Netherlands. Available at: http://edepot.wur.nl/182256 . Google Scholar
J. L. De Kok and M. Grossmann, Natural Hazards 52(1), 143 (2010). Crossref, Google Scholar
R. De Loë, Canadian Geographer 44(4), 355 (2000). Crossref, Google Scholar
A. K. Dixit and R. S. Pindyck , Investment under Uncertainty ( Princeton University Press , Princeton, New Jersey , 1994 ) . Crossref, Google Scholar
S. Fankhauser, J. Smith and R. Tol, Ecological Economics 30(1), 67 (1999). Crossref, Google Scholar
M. Helmset al., Journal of Hydrology 267(2), 94 (2002). Crossref, Google Scholar
D. A. Hennessy and G. Moschini, American Journal of Agricultural Economics 88(2), 308 (2006). Crossref, Google Scholar
IPCC (2007a). Climate Change 2007: The Physical Science Basis, Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change. Cambridge: Cambridge University Press . Google Scholar
IPCC (2007b). Climate Change 2007: Impacts, Adaptation, and Vulnerability, Contribution of Working Group II to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change. Cambridge: Cambridge University Press . Google Scholar
Z. W. Kundzewicz, Water International 27(1), 3 (2002). Crossref, Google Scholar
Z. W. Kundzewicz , Extreme Weather Events and Public Health Responses , eds. W. Kirch , B. Menne and R. Bertollini ( Springer , Berlin , 2005 ) . Google Scholar
Z. W. Kundzewicz, Boreal Environment Research 14(1), 193 (2009). Google Scholar
Z. W. Kundzewiczet al., Natural Hazards 36(2), 165 (2005). Crossref, Google Scholar
Z. W. Kundzewicz, Y. Hirabayashi and S. Kanae, Water Resources Management 24(11), 2633 (2010). Crossref, Google Scholar
P. C. D. Millyet al., Nature 415(6871), 514 (2002). Crossref, Google Scholar
M. Mudelseeet al., Nature 425(6954), 166 (2003). Crossref, Google Scholar
E. Penning-Rowsell, C. Johnson and S. Tunstall, Global Environmental Change 16(4), 323 (2006). Crossref, Google Scholar
T. Petrow and B. Merz, Journal of Hydrology 371(4), 129 (2009). Crossref, Google Scholar
T. Petrowet al., Environmental Management 38(5), 717 (2006). Crossref, Google Scholar
E. A. Rosenberget al., Climatic Change 102(2), 319 (2010). Crossref, Google Scholar
W. Silva, J. P. M. Dijkman and D. P. Loucks, International Journal of River Basin Management 2(2), 101 (2004). Crossref, Google Scholar
A. H. Te Lindeet al., Hydrology and Earth System Sciences 12(3), 943 (2008). Crossref, Google Scholar
R. S. J. Tolet al., Risk Analysis 23(3), 575 (2003). Crossref, Google Scholar
E. Towleret al., Water Resources Research 46, W11504 (2010). Google Scholar
S. Tunstall, S. McCarthy and H. Faulkner, Journal of Flood Risk Management 2(3), 159 (2009). Crossref, Google Scholar

Remember to check out the Most Cited Articles!
Be inspired by these New titles in Energy, Resource & Environmental Economics today. Featuring authors from Princeton, Columbia University, Imperial College Business School and many more!