Title: Investment Decision Making Under Deep Uncertainty

Language: English

Type: Website

Nature: Report

Published: January 1, 2012

Region: Global

Country: Global / Non-Specific

Keywords: PPP Reference Guide, Online Guide, PPP Basics

Document(s):

• Investment Decision Making Under Deep Uncertainty Application to Climate Change1.07 MB

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Document Summary:

While agreeing on the choice of an optimal investment decision is already difficult for any diverse group of actors, priorities, and world views, the presence of deep uncertainties further challenges the decisionmaking framework by questioning the robustness of all purportedly optimal solutions. This paper summarizes the additional uncertainty that is created by climate change, and reviews the tools that are available to project climate change (including downscaling techniques) and to assess and quantify the corresponding uncertainty. Assuming that climate change and other deep uncertainties cannot be eliminated over the short term (and probably even over the longer term), it then summarizes existing decision-making methodologies that are able to deal with climate-related uncertainty, namely cost-benefit analysis under uncertainty, cost-benefit analysis with real options, robust decision making, and climate informed decision analysis. 

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Document Details:

Hallegatte, Stéphane, Ankur Shah, Robert Lempert, Casey Brown, and Stuart Gill. 2012. “Investment Decision Making Under Deep Uncertainty: Application to climate change.” Policy Research Working Paper 6193. Washington, DC: World Bank. [#4432]

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Updated: June 27, 2022