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Research Economics

Uncertainty Matters in Climate Change Decision Making

, by Fabio Todesco
Valentina Bosetti and two coauthors, in a paper published in Nature Climate Change, show that uncertainty aversion can be as decisive in shaping climate policies as the time discount factor

In Selection of Climate Policies under the Uncertainties in the Fifth Assessment Report of the IPCC (Nature Climate Change , Vol. 5, August 2015, advanced online publication doi: 10.1038/nclimate2721) Laurent Drouet (FEEM), Valentina Bosetti (Department of Economics) and Massimo Tavoni (Politecnico di Milano) provide decision makers with a framework to see how their risk and time preferences translate into climate policy recommendations.

Uncertainties, affecting both the cost of climate mitigation actions and that of potential climate damages, including catastrophic events, are huge and are quantified by means of model projections and experts judgments. The paper is the first attempt to bring all this information together, drawing from the results of the three working groups of IPCC Fifth Assessment Report, and applying latest methods from decision science.

It then becomes possible to see, given the best information on uncertainty available as of today, what decision making criteria or time preferences are in line with the 2° C target set by the United Nations Framework Convention on Climate Change.

The data underlying the paper will be soon also available through an interactive tools that should support a transparent and democratic process in the coming climate negotiations.

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