The value of information in a risk management approach to climate change

Kousky, Carolyn and Cooke, Roger M; Laxminarayan, Ramanan and Macauley, Molly K., eds. (2012) The value of information in a risk management approach to climate change. In: The value of information. Springer Netherlands, pp. 19-43. ISBN 9789400748385

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Abstract

The standard economic approach to analyzing the climate change problem has been to search for efficient abatement policies. The massive uncertainties and the possibility for cataclysmic climate damages, however, suggest that a risk management approach is more appropriate. This shifts the policy question to how much risk of catastrophe society is willing to accept. Intuitively, this change in focus may shift our information needs, and the needs should be assessed through a value-of-information analysis. Such calculations should allow for examination of how improved information alters the probability of exceeding a given policy target, incorporate rigorous expert judgment for determining beliefs and quantifying uncertainties, and highlight what scientific information is most valuable for a policymaker attempting to keep the probability of catastrophic climate impacts below a set threshold. We discuss how Bayesian belief nets can be useful tools for this type of analysis.