Pursuing climate certainty: the economic value of learning in infrastructure adaptation investments

A joint Priestley / Civil Engineering seminar

Abstract

Scientific research into climate change pursues a better understanding of our complex earth systems leading to a reduction in the uncertainty regarding future climate and, in theory, more informed adaptation decisions and investment. So what is the value of this improved learning in an actual adaptation investment decision? To answer this requires the consideration of investment appraisal methods, but our traditional methods do not explicitly consider the uncertainty of future climate change and the potential that, as a result of new learning, uncertainties may reduce over time. Those that are more flexible and explicitly consider learning (such as real options analysis – ROA) are relatively resource-intensive and rely on probabilistic data to characterise uncertainty. However, by adapting ROA principles we can test whether, and to what extent, learning can result from the use of successive generations of real life climate projections, and how non-probabilistic uncertainties can be handled in economic adaptation decisions. Using a relatively simple form of ROA on a vulnerable piece of coastal rail infrastructure in the United Kingdom, and two successive UK climate assessments, we retrospectively estimate the monetary values associated with utilising up-dated information on sea-level rise in a major infrastructure investment decision. The results illustrate the potential scale of the value of learning in coastal protection, and other adaptation contexts, and the need for continued investment in climate research.

Biography

Dr David Dawson is a lecturer in Transport Management and Resilience in the School of Civil Engineering at the University of Leeds. Interested primarily in sustainable and resilient transport systems, his interdisciplinary background (spanning paleo climate science to economic appraisal) has enabled him to engage with research on broader sustainable infrastructure transitions and urban flood resilience. He has worked on multiple RCUK research grants (EPSRC/ESRC) and undertaken independent fellowships engaged with transport practitioners on transport resilience and sustainability both nationally (Leverhulme) and internationally (JSPS). David has also provided expert evidence and assistance to Government departments and Assemblies on the management of climate resilience in the transport sector.