Risk Management and Climate Change

18 Pages Posted: 7 Dec 2012 Last revised: 7 May 2018

See all articles by Howard Kunreuther

Howard Kunreuther

University of Pennsylvania - Operations, Information and Decisions Department; National Bureau of Economic Research (NBER)

Geoffrey M. Heal

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Myles Allen

University of Oxford - School of Geography and the Environment

Ottmar Edenhofer

Potsdam Institute for Climate Impact Research (PIK); Mercator Research Institute on Global Commons and Climate Change (MCC); Technische Universität Berlin (TU Berlin)

Christopher Field

Stanford University - Freeman Spogli Institute for International Studies

Gary Yohe

Wesleyan University - Department of Economics

Date Written: December 2012

Abstract

The selection of climate policies should be an exercise in risk management reflecting the many relevant sources of uncertainty. Studies of climate change and its impacts rarely yield consensus on the distribution of exposure, vulnerability, or possible outcomes. Hence policy analysis cannot effectively evaluate alternatives using standard approaches such as expected utility theory and benefit-cost analysis. This Perspective highlights the value of robust decision-making tools designed for situations, such as evaluating climate policies, where generally agreed-upon probability distributions are not available and stakeholders differ in their degree of risk tolerance. This broader risk management approach enables one to examine a range of possible outcomes and the uncertainty surrounding their likelihoods.

Suggested Citation

Kunreuther, Howard C. and Heal, Geoffrey M. and Allen, Myles and Edenhofer, Ottmar and Field, Christopher and Yohe, Gary, Risk Management and Climate Change (December 2012). NBER Working Paper No. w18607. Available at SSRN: https://ssrn.com/abstract=2186335

Howard C. Kunreuther (Contact Author)

University of Pennsylvania - Operations, Information and Decisions Department ( email )

3730 Walnut Street
558 & 559 Jon M. Huntsman Hall
Philadelphia, PA 19104-5340
United States
212-854-0423 (Phone)
215-573-2130 (Fax)

National Bureau of Economic Research (NBER)

Geoffrey M. Heal

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States
212-854-6459 (Phone)
212-316-9219 (Fax)

HOME PAGE: http://www.gsb.columbia.edu/faculty/gheal/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Myles Allen

University of Oxford - School of Geography and the Environment ( email )

Mansfield Road
Oxford OX1 3TB, OX1 3QY
United Kingdom

Ottmar Edenhofer

Potsdam Institute for Climate Impact Research (PIK) ( email )

P.O. Box 601203
14412 Potsdam, Brandenburg
Germany

Mercator Research Institute on Global Commons and Climate Change (MCC)

Torgauer Straße 12-15
Berlin, 10829
Germany

Technische Universität Berlin (TU Berlin)

Straße des 17
Juni 135
Berlin, 10623
Germany

Christopher Field

Stanford University - Freeman Spogli Institute for International Studies ( email )

Stanford, CA 94305
United States

Gary Yohe

Wesleyan University - Department of Economics ( email )

238 Church Street
Middletown, CT 06459-0007
United States

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