Real Option Analysis and Climate Change

1. Front Matter

   Pages i-xiii

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2. Prolegomena: What Does Real Option Analysis Bring to Climate Change Policy

   • Benoit Morel

   Pages 1-8

3. Toward a General Theory of Real Options

   • Benoit Morel

   Pages 9-33

4. Real Option Analysis: Work in Progress, in Need of Progress

   • Benoit Morel

   Pages 35-49

5. Extreme Events, Cat Bonds, ROA in the Context of Fat Tail Distributions, and the Weitzman Effect

   • Benoit Morel

   Pages 51-67

6. Global CO2 Emission Mitigation Through the Looking Glass of ROA

   • Benoit Morel

   Pages 69-84

7. Internationalization of the Response: The Example of the REDD Credits

   • Benoit Morel

   Pages 85-94

8. Prioritizing the Investments Needed to Avoid the Unmanageable (Mitigation) and to Manage the Unavoidable (Adaptation)

   • Benoit Morel

   Pages 95-115

9. Unanswered Questions About Uncertainty, Information, and Investment Decisions

   • Benoit Morel

   Pages 117-128

10. Back Matter

    Pages 129-160

    PDF

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. 

• Real Option Analysis
• Climate Change Adaptation
• Climate Change Mitigation
• Climate Bonds
• Cat Bonds
• Climate Change Policy
• Extreme Events
• Green Investments
• Climate change management
• climate change

• Carnegie Mellon University, Pittsburgh, USA

  Benoit Morel

Benoît Morel did his Phd in theoretical high energy Physics in the university of Geneva. His post-doctoral career took him to Harvard university, Caltech and Stanford university before he joined the faculty of Carnegie Mellon University, in the department of Engineering and Public Policy. At Carnegie Mellon his research was at the interface between mathematics and policy analysis. In addition to do research on the subject, he taught a course in Real Options for more than ten years.


Together with his colleagues in his department at Carnegie Mellon University, he participated to a variety of projects in climate change policy analysis.