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Decision Making Under Uncertainty

Nicola Botta of PIK Potsdam, Germany, and co-workers have developed a technique for determining how important decisions are in circumstances where the consequences are highly unpredictable.

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When applied to a stylized greenhouse-gas emission problem, the approach showed that choosing an early transition to a decarbonized society is reasonable even when the likelihood of such a transition is very low. The research is part of the European TiPES project on Earth’s system tipping points and was published in the Environmental Modeling & Assessment journal.

We have discovered that it is almost always the case that best decisions are still best, even when the probability that they are actually implemented becomes very, very small.

Nicola Botta, Potsdam Institute for Climate Impact Research

In the research, the investigators used a tested theory of policy advice to generate “best” policies for problems where decisions must be made step by step and under ambiguity.

These policies are then contrasted with the remaining options at a given decision step to determine how vital it is to avoid making a mistake when deciding at that step.

The approach was then implemented to a stylized greenhouse-gas emission problem in which the decision-making goal is twofold: 1) Prevent unmanageable effects of climate change and 2) Avoid harming the economy.

The program now assessed the consequences of two options—initiate a transition to a green economy instantaneously or delay such a transition to stop economic damage.

The analysis shows that the best decisions pay off even when the likelihood of such decisions being implemented is very low, for example, due to political uncertainty or inertia of the legislation.

At the first glance this seems surprising, as the common wisdom is that it's not worth betting on something that is not likely to happen. But, if you think twice, the result makes sense. It also provides a guideline to the discussion on whether it is worth to pursue climate targets (like the 1.5 °C target) that are unlikely to actually be met: the answer is yes.

Nicola Botta, Potsdam Institute for Climate Impact Research

More generally, the paper is a methodological contribution towards understanding which decisions under uncertainty matter most. Realizing that certain decisions are less important than others (or less important than expected) can be very helpful, for example in climate negotiations,” explains Nicola Botta.

The TiPES project is an EU Horizon 2020 interdisciplinary climate science project on Earth system tipping points. In more than 10 countries, 18 partner institutions collaborate on this project. The Niels Bohr Institute at the University of Copenhagen, Denmark, and the Potsdam Institute for Climate Impact Research, Germany, coordinate and guide TiPES.

The TiPES project was funded by the European Union’s Horizon 2020 research and innovation program under grant agreement number 820970.

Journal Reference:

Botta, N., et al. (2023) Responsibility Under Uncertainty: Which Climate Decisions Matter Most? Environmental Modeling & Assessment. doi.org/10.1007/s10666-022-09867-w.

Source: https://www.ku.dk/english/

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