As the impact of climate change increases, coastal cities are negatively affected by sea level rise, extreme rainfall, and storm surges. To cope with such climate change impacts, it is essential to invest in climate change adaptation procedures in coastal cities. This paper proposes a rainbow option-based methodology to accurately valuate investments in coastal city development considering climate change. This model is a tool for evaluating the economic feasibility considering the uncertainties of the impacts of climate and urban development projects. The National Capital Integrated Coastal Development (NCICD) project by Indonesian government was used as a case study to validate the effectiveness and applicability of the proposed methodology. The option value of the NCICD project using the proposed model was estimated at US$ 7021 million. The rainbow option, dealing with both climate and market uncertainties, enables decision makers to reasonably assess the value of coastal development projects for their successful execution.
Bibliographical notePublisher Copyright:
© 2018 Elsevier Ltd
All Science Journal Classification (ASJC) codes
- Renewable Energy, Sustainability and the Environment
- General Environmental Science
- Strategy and Management
- Industrial and Manufacturing Engineering