| Title |
Economic Assessment for Flood Control Infrastructure under Climate Change : A Case Study of Imjin River Basin |
| Authors |
Kim, Kyeongseok ; Oh, Seungik |
| DOI |
http://dx.doi.org/10.6106/KJCEM.2017.18.2.081 |
| Keywords |
Climate Change ; Real Options ; Economic Assessment ; Flood ; Uncertainty |
| Abstract |
In Imjin River basin, three floods occurred between 1996 and 199, causing many casualties and economic losses of 900 billion won. In Korea, flood damage is expected to increase in the future due to climate change. This study used the climate scenarios to estimate future flood damage costs and suggested a real options-based economic assessment method. Using proposed method, the flood control infrastructures in Imjin River basin were selected as a case study site to analyze the economic feasibility of the investment. Using RCP (Representative Concentration Pathway) climate scenarios, the future flood damage costs were estimated through simulated rainfall data. This study analyzed the flood reduction benefits through investment in the flood control infrastructures. The volatility of flood damage reduction benefits were estimated assuming that the RCP8.5 and RCP4.5 climate scenarios would be realized in the future. In 2071, the project option value would be determined by applyinga n extension option to invest in an upgrading that would allow the project to adapt to the flood of the 200-year return period. The results of the option values show that the two investment scenarios are economically feasible and the project under RCP8.5 climate scenario has more flood damage reduction benefits than RCP4.5. This study will help government decision makers to consider the uncertainty of climate change in the economic assessment of flood control infrastructures using real options analysis. We also proposed a method to quantify climate risk factors into economic values by using rainfall data provided by climate scenarios. |