Risk Management and Climate Change

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 consensus on probability distributions is not available and stakeholders differ in their degree of risk tolerance. A broader risk-management approach enables a range of possible outcomes to be examined, as well as the uncertainty surrounding their likelihoods.