Graph showing range of water levels in the Great Lakes and the potential benefit from risk management strategies including insurance and dredging
The dotted line shows the range of water levels in the Great Lakes. The blue bars show the Net Option Value (NOV) which is potential benefit from risk management strategies including insurance and dredging. Credit: Meyer et al. [2020], Figure 10
Source: Water Resources Research

A new step has been taken in bringing financial dimensions into water resources decision making. In Meyer et al. [2020], authors from the Universities of North Carolina and Massachusetts have examined both financial and engineering responses to the risk of water level fluctuations for navigation in the Great Lakes. They show that two very different adaptation strategies—dredging waterways and insurance contracts—can be combined practically and analytically. This is a fascinating example, not least because fluctuations of water levels in the Great Lakes are still not entirely predictable, so the risks of low water levels in navigation channels need to be effectively hedged. The finance sector should be paying attention!

Citation: Meyer, E. S, Foster, B. T., Characklis, G. W., Brown, C., & Yates, A. J. [2020]. Integrating physical and financial approaches to manage environmental financial risk on the Great Lakes. Water Resources Research, 56, e2019WR024853. https://doi.org/10.1029/2019WR024853

—Jim Hall, Editor, Water Resources Research

Text © 2020. The authors. CC BY-NC-ND 3.0
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