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Mitigating global warming: a real options approach

Marc Chesney, Pierre Lasserre and Bruno Troja
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Marc Chesney: University of Zurich, IBF
Bruno Troja: University of Zurich, IBF

Annals of Operations Research, 2017, vol. 255, issue 1, 465-506

Abstract: Abstract Mitigation and adaptation represent two solutions to the issue of global warming. While mitigation aims at reducing $$\hbox {CO}_2$$ CO 2 emissions and preventing climate change, adaptation encompasses a broad scope of techniques used to reduce the impacts of climate change once they have occurred. Both have direct costs on a country’s gross domestic product, but costs also arise from temperature increases due to inaction. This paper introduces a tipping point in a real options model and analyzes optimal investment choices in mitigation and their timing.

Keywords: Adaptation; Mitigation; Real options; Delay; Tipping point; Climate change; $$\hbox {CO}_2$$ CO 2; Gross domestic product (search for similar items in EconPapers)
Date: 2017
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Working Paper: Mitigating Global Warming: A Real Option Approach (2016) Downloads
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Handle: RePEc:spr:annopr:v:255:y:2017:i:1:d:10.1007_s10479-016-2258-5