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Local climate change risk assessments (LCCRAs) are best supported by a quantitative integration of physical hazards, exposures and vulnerabilities that includes the characterization of uncertainties. We propose to use Bayesian Networks (BNs) for this task and show how to integrate freely-available output of multiple global hydrological models (GHMs) into BNs, in order to probabilistically assess risks for water supply. Projected relative changes in hydrological variables computed by three GHMs driven by the output of four global climate models were processed using MATLAB, taking into account local information on water availability and use. A roadmap to set up BNs and apply probability distributions of risk levels under historic and future climate and water use was co-developed with experts from the Maghreb (Tunisia, Algeria, Morocco) who positively evaluated the BN application for LCCRAs. We conclude that the presented approach is suitable for application in the many LCCRAs necessary for successful adaptation to climate change world-wide.
We find that high macroeconomic uncertainty is associated with greater accumulation of physical capital, despite a reduction in investment and valuations. To reconcile this puzzling evidence, we show that uncertainty predicts lower depreciation and utilization of existing capital, which dominates the investment slowdown. Motivated by these dynamics, we develop a quantitative production-based model in which firms implement precautionary savings through reducing utilization rather than raising invest-ment. Through this novel intensive-margin mechanism, uncertainty shocks command a quarter of the equity premium in general equilibrium, while flexibility in utilization adjustments helps explain uncertainty risk exposures in the cross-section of industry returns.