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Investing in climate change adaptation and mitigation: A methodological review of real-options studies

Gatiso, Tsegaye Ginbo and Di Corato, Luca and Hoffmann, Ruben (2021). Investing in climate change adaptation and mitigation: A methodological review of real-options studies. AMBIO: A Journal of the Human Environment. 50 , 229-241
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Abstract

Uncertain future payoffs and irreversible costs characterize investment in climate change adaptation and mitigation. Under these conditions, it is relevant to analyze investment decisions in a real options framework, as this approach takes into account the economic value associated with investment time flexibility. In this paper, we provide an overview of the literature adopting a real option approach to analyze investment in climate change adaptation and mitigation, and examine how the uncertain impacts of climate change on the condition of the human environment, risk preferences, and strategic interactions among decisions-makers have been modeled. We found that the complex nature of uncertainties associated with climate change is typically only partially taken into account and that the analysis is usually limited to decisions taken by individual risk neutral profit maximizers. Our findings call for further research to fill the identified gaps.

Authors/Creators:Gatiso, Tsegaye Ginbo and Di Corato, Luca and Hoffmann, Ruben
Title:Investing in climate change adaptation and mitigation: A methodological review of real-options studies
Series Name/Journal:AMBIO: A Journal of the Human Environment
Year of publishing :2021
Volume:50
Page range:229-241
Number of Pages:13
Publisher:SPRINGER
ISSN:0044-7447
Language:English
Publication Type:Article Review/Survey
Article category:Scientific peer reviewed
Version:Published version
Copyright:Creative Commons: Attribution 4.0
Full Text Status:Public
Subjects:(A) Swedish standard research categories 2011 > 5 Social Sciences > 502 Economics and Business > Economics
Keywords:Climate change adaptation, Climate change mitigation, Real-options, Uncertainty
URN:NBN:urn:nbn:se:slu:epsilon-p-106486
Permanent URL:
http://urn.kb.se/resolve?urn=urn:nbn:se:slu:epsilon-p-106486
Additional ID:
Type of IDID
DOI10.1007/s13280-020-01342-8
Web of Science (WoS)000535641200004
ID Code:19828
Faculty:NJ - Fakulteten för naturresurser och jordbruksvetenskap
Department:(NL, NJ) > Dept. of Economics
Deposited By: SLUpub Connector
Deposited On:30 Dec 2020 06:04
Metadata Last Modified:30 Dec 2020 06:11

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