When it comes to decision making in climate change policy, the advancement of science and technology is not the only factor to be considered. The beliefs and preferences of the public also play roles in dictating its overall trajectory. In consideration of the future of global economy in climate change, we these societal sentiments must somehow be incorporated into the model, which has so far been inadequately addressed by previous model-based policy analyses.
Dr. Mark Borsuk, a professor at Thayer School of Engineering at Dartmouth College, spoke this past Friday afternoon at Thayer’s Jones Seminar about his research group’s novel methods for creating a model showing how low probability, high cost outcomes interact with societal risk attitudes to strongly shape the results of quantitative analysis. The goals of this research were to use decision theory to assess implications with climate change and timing and produce estimates of future economic consumption per capita in the climate change budget. Borsuk and his team factored in the increasing population, growing economy, and various emissions scenarios into this model in addition to the largely overlooked role of risk in climate change decision-making. In addition, by incorporating historical investment data across 24 countries, this model becomes global and more statistically significant.
The main challenges in developing this model included characterizing the public preferences and accounting for complex interactions between these preferences and welfare, timing, and risk. Borsuk and his team approached these problems using principles of decision theory, which affirms the decision-maker should always choose the option with the maximum present value of expected utility. To illustrate this, Borsuk asked the audience to consider receiving 3 cookies to last 3 weeks. The audience could have one cookie per week, two cookies the first week, one the second, and none the third, no cookies the first week, one the second, and two in the third, or each week they could flip a coin to determine whether they get two or zero cookies that week. Because people tend to avoid risk, like to receive benefits sooner rather than later, and because the pleasure generated from each additional cookie decreases when eaten immediately after the first, he proved the best choice was to eat one cookie for each of the three weeks. In this interactive, digestible example Borsuk effectively demonstrated how these techniques could apply to mathematical modeling, specifically to his climate change model. Global investment behavior data show strong risk aversion that implies the risk of climate catastrophe outweighs the risk of over-mitigation in policy consideration. The model illustrates that if global policymakers continue to act in the ways they have historically in pursuing relatively gradual emissions reduction, emissions will reduce by about 25% by 2050, whereas if aggressive emissions reduction policies are pursued emissions will reduce by approximately 75%.
At the conclusion of the lecture, Borsuk explained he plans to make improvements to his current model by accounting for uncertainties in fuel prices,population increases,differences in household preferences. He aims to enable consideration of endogenous policy formation, implement a voting mechanism, and evaluate the potential of sector-specific initiatives to bridge policies in his model. In addition, Borsuk introduced his team’s current project of developing an agent-based model designed to account for interactions between and differences in policies spanning the globe by linking his model with a game-theory model of international climate negotiation.