Uncertainty and Climate Change: The IPCC approach vs Decision Theory

Anastasios Xepapadeas

No 2315, DEOS Working Papers from Athens University of Economics and Business

Abstract: One of the most important challenges in the study of climate change and its interactions with the economy is uncertainty. The present paper looks at this uncertainty from two different points of view. The first is the way that IPCC deals with uncertainty at its report and the way that uncertainty is communicated. The IPCC approach is implemented by a combination of qualitative and qualitative methods and the use of heuristics. IPCC studies climate change its evolution and its impact in a context, which in terms of decision making approach is akin to analysis under risk. The second is the point of view of the part of decision theory that deals with uncertainty in the Knightian sense and more specially with uncertainty which is manifested in multiple probabilistic models or priors. The presence of multiple priors is associated with ambiguity aversion and misspecification concerns that necessitate the use of maxmin optimizing approaches. The IPCC and the decision theory approaches are briefly reviewed and compared seeking ways to accommodate the concept of risky parameters or impacts of the IPCC framework, to the framework of optimization under uncertainty under multiple probabilistic models.

Keywords: Climate change; IPCC; risk; uncertainty; misspecification; ambiguity aversion (search for similar items in EconPapers)
JEL-codes: D81 Q54 (search for similar items in EconPapers)
Date: 2023-08-24
New Economics Papers: this item is included in nep-ene, nep-env, nep-hme and nep-upt
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Journal Article: Uncertainty and climate change: The IPCC approach vs decision theory (2024)
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