Hurry up or wait: The effect of climate change and variability on the timing of private adaptation

Charles Sims, Sarah Null () and Josue Medellin-Azuara ()
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Sarah Null: Department of Watershed Sciences, Utah State University, https://qcnr.usu.edu/directory/null_sarah
Josue Medellin-Azuara: Department of Civil & Environmental Engineering, University of California-Davis

No 2017-04, Working Papers from University of Tennessee, Department of Economics

Abstract: Climate variability makes the future benefits of adaptation uncertain. When adaptation comes in the form of discrete investments that are difficult to adjust, this uncertainty creates an economic value (an option value) to delaying adaptation to collect more information. This option value suggests adaptation will be slower than predicted by benefit-cost analysis. However, it is unclear how increases in climate variability influence this adaptation option value. Addressing this knowledge gap becomes critically important since climate change in many areas will be characterized by temperature and precipitation that is more variable than historic conditions. This study uses down-scaled results from four different global circulation models and two different emission scenarios to determine how climate trends and variability influence an adaptation option value. Using water-saving irrigation investments in California’s Sacramento Valley as an example, results indicate that climate variability is an important predictor of private adaptation uptake but the influence of climate variability on adaptation shifts as the climate changes.

Keywords: Climate change; adaptation; option value (search for similar items in EconPapers)
JEL-codes: Q5 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2017-09
New Economics Papers: this item is included in nep-agr and nep-env
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http://web.utk.edu/~jhollad3/RePEc/2017-04.pdf First version, 2017 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:ten:wpaper:2017-04

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