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Adaptation to climate change and climate variability: Do it now or wait and see?

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  • Narita, Daiju
  • Quaas, Martin F.

Abstract

As growing attention is paid to climate change adaptation as an actual policy issue, the significant meaning of climate variability in adaptation decisions is beginning to be recognized. By using a real option framework, we shed light on how climate change and climate variability affect individuals' (farmers') investment decisions with regard to adaptation. As a plausible case in which the delay carries policy implications, we investigate farmers' choices when adaptation involves the use of an open-access resource (water). The results show that uncoordinated farmers with a high risk aversion may under-adapt while farmers with a low risk aversion would over-adapt under the same conditions. Private adaptation should be supported or discouraged accordingly if farmers are not convinced about the possibilities of collective resource management in the long run.

Suggested Citation

  • Narita, Daiju & Quaas, Martin F., 2012. "Adaptation to climate change and climate variability: Do it now or wait and see?," Kiel Working Papers 1809, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:1809
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    Cited by:

    1. Graeme Guthrie, 2019. "Real options analysis of climate-change adaptation: investment flexibility and extreme weather events," Climatic Change, Springer, vol. 156(1), pages 231-253, September.
    2. Marc Baudry & Edouard Civel & Camille Tévenart, 2023. "Land allocation and the adoption of innovative practices in agriculture: a real option modelling of the underlying hidden costs," Working Papers hal-04159839, HAL.
    3. Graeme Guthrie, 2021. "Discounting, Disagreement, and the Option to Delay," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 80(1), pages 95-133, September.
    4. Charles Sims & Sarah Null & Josue Medellin-Azuara, 2017. "Hurry up or wait: The effect of climate change and variability on the timing of private adaptation," Working Papers 2017-04, University of Tennessee, Department of Economics.
    5. Luca Di Corato & Tsegaye Ginbo, 2020. "Climate change and coffee farm relocation in Ethiopia: a real-options approach," Working Papers 2020:02, Department of Economics, University of Venice "Ca' Foscari".
    6. Johnson, Kelsey K. & Lewis, David J., 2024. "Weather variability risks slow climate adaptation: An empirical analysis of forestry," Journal of Environmental Economics and Management, Elsevier, vol. 125(C).
    7. Charles Sims & Sarah E. Null & Josue Medellin-Azuara & Augustina Odame, 2021. "Hurry Up Or Wait: Are Private Investments In Climate Change Adaptation Delayed?," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 12(04), pages 1-36, November.

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    More about this item

    Keywords

    adaptation to climate change; climate variability; risk and uncertainty; real option; water; open-access resources;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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