Climate change will impact cities and low-lying areas today and in the coming decades. Planners and decision-makers are faced with the challenge to deal with extreme events and identify, assess and implement adaptation options under uncertain climate change impacts. Recent severe river flooding in Europe triggered debates on future projections and flood frequency and the need for adaptive investments, such as flood protection measures. As there exists uncertainty about the impact of climate change on flood risks in river basis, a relevant question for decision-makers responsible for flood protection is thus how to deal with this uncertainty. An adaptation strategy can include a mix of both structural and non-structural measures, where structural measures have high investment costs, for example dike heightening, and non-structural measures have low investment costs, for example early warning systems.

River flooding in Europe has triggered debates among scientists and policy-makers on future projections of flood frequency and the need for flood protection measures. Because there exists uncertainty about the impact of climate change on flood risk, such investments require a careful analysis of expected benefits and costs. The objective of the economic investment model is to show how climate change uncertainty affects the decision to invest in flood protection measures. The model simulates optimal decision making in flood protection, and incorporates flexible timing of investment decisions and scientific uncertainty on the extent of climate change impacts. This model allows decision-makers to cope with the uncertain impacts of climate change on the frequency and damage of river flood events and minimises the risk of under- or over-investment. One of the innovative elements is the explicit distinction between structural and non-structural flood protection measures.

The optimal investment decision today depends strongly on the cost structure of the adaptation measures and the discount rate, especially the ratio of fixed and weighted annual costs of the measures. A higher level of annual flood damage and later resolution of uncertainty in time increases the optimal investment. Furthermore, the optimal investment decision today is influenced by the possibility of the decision-maker to adjust his decision at a future moment in time.

More information on the model can be found here: