Benoit Morel

This book sets out to reframe the theory of real options so that it can be used to support environmental investments for climate change adaptation and mitigation. Climate change policy often involves making decisions that concern extended time periods, and doing so under considerable uncertainty. By expanding and broadening the framework of real options, this book first introduces readers to new ways of quantifying investment decisions that can much more effectively address the shape and size of the uncertainty than traditional approaches using Net Present Value. In turn, the second part of the book applies this new theoretical framework to climate change policy by presenting a number of examples, and by providing a general perspective on investment decisions related to climate change and how to prioritize them.

A New Framework for Environmental Policy Analysis

Real Option Analysis and Climate Change

Igor Linkov

The concept of “environmental security” has emerged as one basis for understanding international conflicts. This phrase can mean a variety of things. It can signify security issues stemming from environmental concerns or conflicting needs, or it can mean that the environment is treated as a resource for the long term, and the question is what should be done today to preserve the quality of the environment in the future. In the same way that energy security is about ensuring access to energy for the long run, it can also mean that pressing environmental concerns create a situation where different countries and communities are forced to collaboratively design a unified response, even if cooperation is not generally in the logic of their relations. Over the last several years, the authors of this book and their colleagues have tried to demonstrate the power of risk assessment and decision analysis as valuable tools that decision makers should use for a broad range of environmental problems, including environmental security. Risk analysis is almost more a state of mind or a way of looking at problems than it is a kind of algorithm or a set of recipes. It projects a kind of rationality on problems and forces a certain degree of quantitative rigor, as opposed to the all too common tendency of making environmental recommendations based on anecdotal evidence.

Proceedings of the NATO Advanced Research Workhop on The Role of Risk Assessment in Environmental Security and Emergency Preparedness in the Mediterranean Region, held in Eilat, Israel, April 15-18, 2004

Benoit Morel

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