This book sets out to reframe the theory of real options so that it can be used to support environmental investments for climate change adaptation and mitigation. Climate change policy often involves making decisions that concern extended time periods, and doing so under considerable uncertainty. By expanding and broadening the framework of real options, this book first introduces readers to new ways of quantifying investment decisions that can much more effectively address the shape and size of the uncertainty than traditional approaches using Net Present Value. In turn, the second part of the book applies this new theoretical framework to climate change policy by presenting a number of examples, and by providing a general perspective on investment decisions related to climate change and how to prioritize them.

1. Prolegomena: What does real option Analysis bring to climate change Policy?.- 2. Toward a general theory of real options.- 3. Real option analysis: a work in progress in need of progress.- 4. Extreme events, CatBonds, ROA in the context of Fat Tail distributions and the Weitzman effect.- 5. Global CO2 Emission through the Looking Glass of ROA.- 6. Internationalization of the Response: the Example of REDD Credits.- 7. Prioritization of investments needed to avoid the unmanageable (mitigation) and to manage the unavoidable (adaptation).- 8. Unanswered Questions about Uncertainty, Information and Investment Decisions

Benoît Morel did his Phd in theoretical high energy Physics in the university of Geneva. His post-doctoral career took him to Harvard university, Caltech and Stanford university before he joined the faculty of Carnegie Mellon University, in the department of Engineering and Public Policy. At Carnegie Mellon his research was at the interface between mathematics and policy analysis. In addition to do research on the subject, he taught a course in Real Options for more than ten years.

Together with his colleagues in his department at Carnegie Mellon University, he participated to a variety of projects in climate change policy analysis.