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Water Resources Planning under Climate Change: A 'Real Options' Approach

Presenter:  Marc Jeuland, Assistant Professor, Sanford School of Public Policy, Duke University
Time:   Thursday, April 8, 2010, 12:30 to 2:00 P.M.

Location:  J4-044

This research develops a real options approach for planning new water resources infrastructures and associated operational strategies. The approach focuses on a series of staged decisions – the selection of new dams, their sizing, timing and sequencing, and finally their operating rules – using an example of large hydropower development alternatives in the Blue Nile. The analysis relies on a simulation model that includes physical linkages between climate change and system hydrology, and tests the sensitivity of the economic outcomes of dams to climate change and other uncertainties. It is determined that there is no single best-performing system configuration across a range of very plausible future climate conditions. The real options framework is therefore useful for helping to identify configurations that are both more robust to poor outcomes and still maintain sufficient flexibility to capture high upside benefits should favorable future conditions arise. The framework could readily be extended to explore a range of additional flexible features that could be usefully built into dams (or water resources projects more generally) to improve their economic performance.

Presenter’s Bio:

Marc Jeuland has just accepted an assistant professorship in the Sanford School of Public Policy at Duke University, where he will teach courses on transboundary water cooperation, the economic evaluation of environmental and health programs, and general public investment theory and cost-benefit analysis. Marc Jeuland earned his PhD in Environmental Sciences and Engineering with a minor in Economics from the University of North Carolina at Chapel Hill in December 2009. His PhD research focused on the economic implications of climate change for proposed dams in the Eastern Nile. This research has supported and continues to support strategic economic planning studies conducted by the Nile team at the World Bank. In addition, he has joined a multi-disciplinary team working under the umbrella of the South Asia Water Initiative, on a Ganges Strategic Basin Assessment. His other research interests are in program evaluation and economic analysis of water, sanitation and health (particularly vaccination) interventions, including expanding the use of survey and revealed preference techniques for nonmarket valuation. He has worked in many countries in Africa, and several more in South Asia and South America.

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