Uncertainty and decision in climate change economics

Geoffrey Heal and Antony Millner

No 108, GRI Working Papers from Grantham Research Institute on Climate Change and the Environment

Abstract: Uncertainty is intrinsic to climate change: we know that the climate is changing, but not precisely how fast or in what ways. Nor do we understand fully the social and economic consequences of these changes, or the options that will be available for reducing climate change. Furthermore the uncertainty about these issues is not readily quantified and expressed in probabilistic terms: we are facing deep uncertainty or ambiguity rather than risk in the classical sense, rendering the classical expected utility framework of limited value. We review the sources of uncertainty about all aspects of climate change and resolve these into various components, commenting on their relative importance. Then we review decision-making frameworks that are appropriate in the absence of quantitative probabilistic information, including non-probabilistic approaches and those based on multiple priors, and discuss their application in climate change economics.

Date: 2013-03
New Economics Papers: this item is included in nep-cdm, nep-ene, nep-env, nep-hme, nep-res and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Working Paper: Uncertainty and Decision in Climate Change Economics (2013)
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