Optimal dynamic climate adaptation pathways: a case study of New York City - Chi Truong
Title: Optimal dynamic climate adaptation pathways: a case study of New York City
Abstract: Assessing climate risk and its potential impacts on our cities and
economies is of fundamental importance. Extreme weather events, such
as hurricanes, floods, and storm surges can lead to catastrophic damages. We propose a flexible approach based on real options analysis
and extreme value theory, which enables the selection of optimal adaptation pathways for a portfolio of climate adaptation projects. We
model the severity of extreme sea level events using the block maxima approach from extreme value theory, and then develop a real
options framework, factoring in climate change, sea level rise uncertainty, and the growth in asset exposure. We then apply the proposed
framework to a real-world problem, considering sea level data as well
as different adaptation investment options for New York City. Our
research can assist governments and policy makers in taking informed
decisions about optimal adaptation pathways and more specifically
about reducing flood and storm surge risk in a dynamic settings.