Assessing the Problem Formulation in an Integrated Assessment Model: Implications for Climate Policy Decision-Support

Abstract:

Integrated assessment models (IAMs) are often used with the intent to aid in climate change decisionmaking. Numerous studies have analyzed the effects of parametric and/or structural uncertainties in IAMs, but uncertainties regarding the problem formulation are often overlooked. Here we use the Dynamic Integrated model of Climate and the Economy (DICE) to analyze the effects of uncertainty surrounding the problem formulation. The standard DICE model adopts a single objective to maximize a weighted sum of utilities of per-capita consumption. Decisionmakers, however, may be concerned with a broader range of values and preferences that are not captured by this a priori definition of utility. We reformulate the problem by introducing three additional objectives that represent values such as (i) reliably limiting global average warming to two degrees Celsius and minimizing both (ii) the costs of abatement and (iii) the damages due to climate change. We derive a set of Pareto-optimal solutions over which decisionmakers can trade-off and assess performance criteria a posteriori. We illustrate the potential for myopia in the traditional problem formulation and discuss the capability of this multiobjective formulation to provide decision support.