Optimal timing, cost benefit analysis and adaptation strategies

WP 6 theme 8 Knowledge for Climate

Direct local impacts of excessive precipitation, increasing peak flows of rivers and sea level rise pose challenges for a country such as the Netherlands. Various actors can consider various adaptation options ranging from raising dikes to creating additional water storage under greenhouses.  The shared denominator of the economic dimension of any such an option is that the benefits of taking a measure in terms of reduced damages should be larger than the costs associated with the investment. Whereas such a criterion may sound simple and straightforward, in practice it may be rather hard to determine optimal investment. The decision problems at hand, such as dike investment, selection of the best investment option out of a number of feasible alternatives, or determining  the optimal order of investment under practical constraints is further complicated by uncertainty and the possibility that new information may come in later in time. Also, a cost-benefit analysis typically involves benefits which are hard to price. For instance, what may be worth the experience and the knowledge build-up an innovative project generates? In this research ample attention is paid to optimal dike heightening, alternative investment selection, the problem of budget allocation over time and an example of how one could value an ‘intangible benefit’ . Next to gaining theoretical insights in the structure of the problems supporting local actors in the decision making is a principle objective of the research.