Investment and financial flows relevant to the development of an effective and appropriate international response to Climate Change.

This technical background paper reviews and analyses existing and projected investment flows and financing relevant to the development of an effective and appropriate international response to climate change, with particular focus on the needs of developing countries. It provides an assessment of the investment and financial flows that will be necessary in 2030 to meet worldwide requirements for mitigating and adapting to climate change under different scenarios of social and economic development, especially as they impact the well-being of developing countries

Agreeing on Robust Decisions: New Processes for Decision Making Under Deep Uncertainty

Investment decision making is already difficult for any diverse group of actors with different priorities and views. But the presence of deep uncertainties linked to climate change and other future conditions further challenges decision making by questioning the robustness of all purportedly optimal solutions. While decision makers can continue to use the decision metrics they have used in the past (such as net present value), alternative methodologies can improve decision processes, especially those that lead with analysis and end in agreement on decisions.

Fiscal Implications of Climate Change

This paper provides a primer on the fiscal implications of climate change, in particular the policies for responding to it. Many of the complicated challenges that arise in limiting climate change (through greenhouse gas emissions mitigation), and in dealing with the effects that remain (through adaptation to climate change impacts), are of a fiscal nature. While mitigation has the potential to raise substantial public revenue (through charges on greenhouse gas emissions), adaptation largely leads to fiscal outlays.

Adapting agriculture to climate change

We evaluate the potential impacts and measure the potential limits of adaptation of agriculture to climate change. Pressures on land and water resources are expected to intensify existing risks in low latitude areas – e.g., South-East Asia deltas – and in regions with current water scarcity – e.g. Mediterranean, and create new opportunities in some northern temperate areas – e.g., Northern Russia, Northern Europe. The need to respond to these risks and opportunities is addressed by evaluating the costs and benefits of a number of technical and policy actions.

Getting Real about Adapting to Climate Change: Using ‘Real Options’ to Address the Uncertainties

Scientists predict that some climate change is already inevitable, even if greenhouse emissions are stabilised. Adaptation strategies will be of comparable importance to reducing emissions. However, the specific effects of climate change are currently unknowable, especially at the local level. Given this uncertainty, deterministic adaptation strategies are inappropriate.

Harmful are Adaptation Restrictions

The dominant assumption in economic models of climate policy remains that adaptation will be implemented in an optimal manner. There are, however, several reasons why optimal levels of adaptation may not be attainable. This paper investigates the effects of suboptimal levels of adaptation, i.e. adaptation restrictions, on the composition and level of climate change costs and on welfare. Several adaptation restrictions are identified and then simulated in a revised DICE model, extended with adaptation (AD-DICE).

Adaptation, flexibility and project decisionmaking with climate change uncertainties

Project planning in the future must directly address both climate change and uncertainties about it. This paper presents the use of classical decision criteria, such as maximin and minimax regret, and approaches for adapting to climate change given the uncertainties. Adaptation strategies can help reduce the effects of uncertainties by allowing for adjustments in designs as the future climate evolves, although at a cost for such future flexibility.

Preserving Value through Adaptation to Climate Change

This study examines the potential role of adaptation in assets and operations in response to climate change, and the expected effect of adaptation activities on firm value. In particular, by defining adaptive capacity of assets and operations, we can value the adaptive capacity of an asset (such as a seawall or a desalination plant) whose capital could lie idle for decades.

Preparing for catastrophic climate change.

We study optimal adaptation to climate change when the harmful consequences of globalwarming are associated with uncertain occurrence of abrupt changes. The adaptation policy entails the accumulation of a particular sort of capital that will eliminate or reduce the catastrophic damage of an abrupt climate change when (and if) it occurs. The occurrence date is uncertain. The policy problem involves balancing the tradeoffs between the (certain) investment cost prior to occurrence and the benefit (in reduced damage) that will be realized after the (uncertain) occurrence date.

Implications of a lowered damage trajectory for mitigation in a continuous-time stochastic model

We provide counterexamples to the idea that mitigation of greenhouse gas emissions, and adaptation to climate change, are always substitutes. We consider optimal mitigation policy when climate damages follow a geometric Brownian motion process with positive drift and mitigation is lumpy. Climate damages can be affected by adaptation in two main ways: 1) reduced proportionately for given climate impact; or 2) their growth path down-shifted. In either case expectation and variance of the climate damage are both reduced by adaptation.