Appraisal of adaptation to river and coastal flood in Bilbao

Mainstreaming adaptation in infrastructure development is a crucial component of building resilience to climate change impacts. This Insight presents an appraisal of economic projects to support the assessment of adaptation options to river and coastal flooding in the city of Bilbao in Spain. The economic methodology to incorporate uncertainty into decision-making processes considers three approaches: 1) estimating the net present value of the expected damage using a stochastic model; 2) estimating two risk measures (value at risk, VaR, and expected shortfall, ES) which are robust indicators for assessing risk and provide key information in situations of uncertainty; 3) using a real options analysis framework, which can contribute to robustness offering flexibility in adaptation measures. Key to the assessment is to incorporate uncertainties in the economic appraisals. Addressing these uncertainties is a priority, and is discussed throughout the case study.