Economic Assessment of Flood Control Facilities under Climate Uncertainty: A Case of Nakdong River, South Korea

• Main Authors: Kyeongseok Kim, Ji-Sung Kim
• Format: Article
• Language: English
• Published: MDPI AG 2018-01-01
• Series: Sustainability
• Subjects: climate change; flood control; real options analysis; economic assessment; adaptation
• Online Access: http://www.mdpi.com/2071-1050/10/2/308

Climate change contributes to enhanced flood damage that has been increasing for the last several decades. Understanding climate uncertainties improves adaptation strategies used for investment in flood control facilities. This paper proposes an investment decision framework for one flood zone to cope with future severe climate impacts. This framework can help policy-makers investigate the cost of future damage and conduct an economic assessment using real options under future climate change scenarios. The proposed methodology provides local municipalities with an adaptation strategy for flood control facilities in a flood zone. Using the proposed framework, the flood prevention facilities in the Nakdong River Basin of South Korea was selected as a case study site to analyze the economic assessment of the investments for flood control facilities. Using representative concentration pathway (RCP) climate scenarios, the cost of future flood damage to 23 local municipalities was calculated, and investment strategies for adaptation were analyzed. The project option value was determined by executing an option to invest in an expansion that would adapt to floods under climate change. The results of the case study showed that the proposed flood facilities are economically feasible under both scenarios used. The framework is anticipated to present guidance for establishing investment strategies for flood control facilities of a flood zone in multiple municipalities’ settings.