Optimal dynamic climate adaptation pathways: a case study of New York City

Paper: arXiv 2402.02745

Authors: Chi Truong, Matteo Malavasi, Han Li, Stefan Trueck, Pavel V. Shevchenko

Abstract

Assessing climate risk and its potential impacts on our cities and economies is of fundamental importance. Extreme weather events, such as hurricanes, floods, and storm surges can lead to catastrophic damages. We propose a flexible approach based on real options analysis and extreme value theory, which enables the selection of optimal adaptation pathways for a portfolio of climate adaptation projects. We model the severity of extreme sea level events using the block maxima approach from extreme value theory, and then develop a real options framework, factoring in climate change, sea level rise uncertainty, and the growth in asset exposure. We then apply the proposed framework to a real-world problem, considering sea level data as well as different adaptation investment options for New York City. Our research can assist governments and policy makers in taking informed decisions about optimal adaptation pathways and more specifically about reducing flood and storm surge risk in a dynamic settings.

Complexity vs Empirical Score

• Math Complexity: 6.5/10
• Empirical Rigor: 6.0/10
• Quadrant: Holy Grail — high math complexity, high empirical rigor

Why this score: The paper effectively combines Real Options Analysis with Extreme Value Theory (Block Maxima approach) to formulate dynamic climate adaptation strategies. It applies this mathematical framework to real-world sea level data for New York City, balancing quantitative modeling with practical policy implications.

Research Flowchart

  flowchart TD
    A["Research Goal: Optimal Dynamic Climate Adaptation Pathways for NYC"] --> B["Data Inputs: Sea Level Data, Asset Exposure, Investment Options"]
    B --> C["Extreme Value Theory: Block Maxima Approach for Extreme Sea Levels"]
    C --> D["Real Options Analysis: Modeling SLR Uncertainty & Asset Growth"]
    D --> E["Evaluation: Portfolio Selection of Adaptation Projects"]
    E --> F["Outcome: Decision Framework for NYC Flood & Storm Surge Risk"]