Decision Criteria In An Iterative Risk Management Framework

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This section explores some of the criteria that would be most critical for climate-related decision making in the context of an iterative risk management framework.

Risk reduction potential. A key benefit desired for any action taken to respond to climate change is the potential to actually reduce climate-related risks, by either reducing the likelihood of adverse events (i.e., limiting climate change) or reducing vulnerability to such events (i.e., adapting to climate change) or ideally both. Although risk reduction potential is often difficult to quantify, it can provide a basis for choosing between different options under consideration. As an example, to respond to sea level rise, a community may face a choice between building sea walls to protect buildings and infrastructure or moving those assets to higher ground. The latter option would be more expensive and disruptive in most situations, but it could protect against a broader range of outcomes.

In certain cases, response options can reduce some risks while increasing others, thus requiring trade-offs among risks. For example, promoting more widespread use of air-conditioning to adapt to higher summer temperatures will undermine efforts to limit climate change, to the extent that the additional electricity required is generated by sources that emit GHGs. In other cases, an option may offer complementary risk reduction benefits. For example, improvements in the energy efficiency of buildings and their cooling systems can both constrain the growth of GHG emissions and reduce the threat that heat waves pose to vulnerable populations.

Some actions—such as those involving investment in new technologies, infrastructure, and workforce capacity—may offer little or no direct risk reduction potential themselves but can open the door to future options that may significantly reduce risk. For example, investing in development of a "smart grid" would provide flexibility for integrating distributed renewable electricity generation, and investing in the training of scientists and engineers can improve scientific understanding and the likelihood of significant technological breakthroughs over time.12 Other options, in contrast, may foreclose future risk-reducing possibilities. For example, continuing to build new coal-fired power plants will lock in further dependence on GHG-intensive energy sources (unless commercial-scale carbon capture and storage soon become widely implemented).

The field of risk analysis, which has a large research literature,13 offers general guidance on the process of estimating risk reduction potential. For the issue of climate change in particular, the many uncertainties and personal judgments that are inevi

A Framework for Making America's Climate Choices tably involved in weighing different types of risks have led some analysts to develop methods that synthesize the judgments of many experts.14

Feasibility and effectiveness.The potential for any given climate change response action to reduce risk must be measured against the feasibility (which may encompass technical, economic, and political feasibility) and the likely effectiveness of that action. A good deal is known, for example, about the feasibility and effectiveness of certain renewable energy technologies (e.g., wind), while relatively little is known about the feasibility of others (e.g., tidal).15 Where an option promises substantial risk reduction but has high costs and is of unproven effectiveness, the best response may be investment in further study or pilot testing to reduce unknowns surrounding its application.

Questions about feasibility and effectiveness also apply to policy tools. Insights about the effectiveness of different policy approaches can be gained from the research literature and also from the diverse experience of state and local governments, efforts in other nations, and U.S. federal programs in analogous contexts. For instance, to learn about the effectiveness of cap-and-trade programs, one can look to the experiences of the Regional Greenhouse Gas Initiative of the northeastern states, of the European Union's emission trading system, and of the acid rain cap-and-trade program under Title IV of the Clean Air Act.16

Cost and cost-effectiveness. In a world of finite resources, cost and cost-effectiveness are important criteria for helping policy makers decide among different response options. Cost-effectiveness analysis assumes a similar level of risk reduction among options—if two options have similar risk reduction potential and likely effectiveness, a decision maker would choose the option with lower costs. In contrast, cost-benefit analysis is typically used to determine an optimal risk reduction strategy that balances costs and social benefits. As discussed earlier, however, cost-benefit and cost-effectiveness analysis have some important limitations when it comes to analyzing climate choices.

The cost of some options may be so disproportionate to risk reduction potential as to be clearly unreasonable: for instance, certain actions may threaten widespread business closures or other economic impacts that render the option unwise or politically impractical. (For this reason, cost considerations could be viewed as one aspect of the "feasibility" criterion discussed above.) In contrast, some options may be warranted by the positive economic returns or ancillary benefits they offer, even without consideration of climate-related benefits—including, for example, programs to encourage energy efficiency that yield a positive net economic benefit.17

AMERICA'S CLIMATE CHOICES

Ancillary costs and benefits. Some options designed to reduce climate-related risks may have negative impacts on national interests in other areas, such as ecosystem services, human health, and national security. Examples include nuclear proliferation risks associated with increased reliance on nuclear power, and risks to ecological systems and food security stemming from increased assignment of agricultural land to biofuels production.

Other policies designed to limit or adapt to climate change may have significant ancillary benefits. For example, increasing energy efficiency to limit GHG emissions can also reduce emissions of conventional pollutants,18 and reducing GHG emissions from the transportation sector could potentially reduce petroleum consumption and thus the nation's vulnerability to high oil prices and oil-supply disruptions.19 Encouraging carbon sequestration through soil and forest management practices (e.g., minimum tillage practices, reducing timber harvesting, improving manure management, reducing livestock herd size) may also offer the benefits of helping to control nutrient runoff, soil erosion, and habitat loss.20 It is wise to consider potential co-benefits of this kind when choosing among alternative possible strategies for reducing climate risks.

Equity and fairness. Equity and fairness concerns are important criteria for evaluating any public policy option. International debates have focused on how to fairly allocate the burdens of addressing climate change between developed and developing countries. Intergenerational justice debates center around defining the present generation's obligations to help ensure the well-being of future generations. Domestic policy debates have focused on how policies for reducing GHG emissions may alleviate or exacerbate burdens among different parts of society (e.g., on low-income households or on geographical regions that are heavily dependent on fossil fuel-based industries) and on the socioeconomic distributional impacts of actions taken to adapt to climate change.

Consider, for example, the case of lower-income households, which consume less energy per capita and thus contribute proportionately less to GHG emissions relative to more affluent households. Energy purchases are a larger fraction of their total consumption, and therefore they are more affected by changes in energy prices.21 Limited discretionary income may also preclude lower-income households from participating in energy efficiency initiatives that would reduce their energy costs over the longer term. At the same time, lower-income households may suffer disproportionately from the impacts of climate change.22 Some ways in which policy design can help address such concerns are discussed in Chapter 5.

A Framework for Making America's Climate Choices

International considerations. America's climate choices affect and are affected by the global dimensions of climate change. U.S. emissions reductions alone will not be adequate to avert dangerous climate change risks; rather, our emission reductions must be accompanied by comparable actions from all other major emitters. U.S. climate policies can potentially have a major effect on the actions other countries take, and this potential represents another important criterion for evaluating domestic response options. In general, domestic policies that help leverage broader international-scale efforts (for example, cooperative research and development programs in clean energy technology) can be expected to reduce overall climate risk more than policies that affect U.S. emissions alone. Similarly, in comparing the advantages and disadvantages of different policy options for reducing U.S. GHG emissions (e.g., cap-and-trade programs, carbon taxes, regulatory approaches), each should be considered in the context of how they link domestic policies to global efforts.

Robustness. Given the uncertainties inherent in predicting future climate change and its impacts, as well as the difficulty of predicting technological, social, and economic developments, there is a great strategic advantage in pursuing response options that can perform well under a wide range of possible futures. For instance, sound risk management in the agricultural sector may include investing in the development of crop varieties that are resilient to a wide range of temperature and precipitation conditions. As another example, market-based regimes offer an advantage over industry-specific performance standards because the former approach has a higher likelihood of continued effectiveness under varying future economic or technological conditions.23

When the likelihood of different future outcomes is not well known, pursuing multiple options (i.e., a portfolio approach) and other "hedging" strategies can help ensure a robust response. For example, it would be prudent to invest in multiple new energy technologies to meet future needs because the ultimate success of any one new technology is always uncertain. As another example, it is prudent to design the infrastructure for transportation, water, and utilities to withstand a range of weather extremes including intense rainfall, flooding, and drought scenarios. Ensuring robustness may also include strengthening general adaptive capacity through early warning systems and disaster response preparations.

The degree to which any particular policy option meets the different criteria listed above depends not only on the type of policy but also its scope and stringency. For example, an overly weak auto fuel efficiency standard may be cheap and politically feasible but not very effective in reducing climate-related risks, whereas an overly tough standard may promise high levels of risk reduction but be very expensive, pose significant equity concerns, and be difficult to implement successfully.

AMERICA'S CLIMATE CHOICES

Ultimately, any choice involves weighing multiple criteria. Decision makers will differ in their judgments about which criteria are most important and in their methods for dealing with uncertainties. Even when it is possible to characterize how different response actions rank under the different criteria, this information may not necessarily point to a preferred action or strategy. Rather, this information provides a basis on which decision makers can make reasoned judgments and engage in informed debates. The decision sciences offer a variety of methods for helping decision makers evaluate and make trade-offs among options,24 but even these methods do not obviate the need for deliberation and judgment.

CHAPTER CONCLUSION

In the committee's judgment, iterative risk management—which emphasizes taking action now, but in doing so, being ready to learn from experience and adjust these efforts later on—offers the most useful approach for guiding America's climate choices. The successful application of this approach requires broad-based continuous learning by the scientific community together with decision makers in the government, the private sector, and the general public.

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