January 2, 2011

Notes on Applying ‘Real Options’ to Climate Change Adaptation Measures, with Examples from Vietnam

by Leo Dobes

- The timing, intensity and location of climate change impacts is not known to any degree of precision. Because most deterministic analyses and policy prescriptions ignore this uncertainty, their recommendations are likely to waste community resources. Applying real options thinking allows an incremental and flexible approach. Adaptation measures are implemented only as better knowledge becomes available over time. Several examples are given of real options in the Mekong Delta, with a comparison of net present values of two housing alternatives.

Dobes, L. (2010). "Notes on Applying ‘Real Options’ to Climate Change Adaptation Measures, with Examples from Vietnam." CCEP working paper 7.10, Nov 2010.