Rare disasters and risk attitudes: international differences and implications for integrated assessment modeling.

Evaluation of public policies with uncertain economic outcomes should consider society's preferences regarding risk. However, the preference models used in most integrated assessment models, including those commonly used to inform climate policy, do not adequately characterize the risk attitudes revealed by typical investment decisions. Here, we adopt an empirical approach to risk preference description using international historical data on investment returns and the occurrence of rare economic disasters. We improve on earlier analyses by employing a hierarchical Bayesian inference procedure that allows for nation-specific estimates of both disaster probabilities and preference parameters. This provides a stronger test of the underlying investment model than provided by previous calibrations and generates some compelling hypotheses for further study. Specifically, results suggest that society is substantially more averse to risk than typically assumed in integrated assessment models. In addition, there appear to be systematic differences in risk preferences among nations. These results are likely to have important implications for policy recommendations: higher aversion to risk increases the precautionary value of taking action to avoid low-probability, high-impact outcomes. However, geographically variable attitudes toward risk indicate that this precautionary value could vary widely across nations, thereby potentially complicating the negotiation of transboundary agreements focused on risk reduction.

Using decision analysis to determine optimal experimental design for monitoring sewer exfiltration with tracers.

The tracer methods developed to assess exfiltration from sewers in the European project APUSS (assessment of the performance of sewer systems) have a high degree of freedom with regard to the choice of tracer and the dosing strategy. These can lead to very different degrees of uncertainty in the measured exfiltration ratio. In this study, we demonstrate how to select an optimal experimental design using decision analysis, which accounts for this uncertainty and its associated costs. Although the results are site-specific, we can conclude generally that, when NaCl is used as the tracer, the accuracy of the exfiltration estimate is most sensitive to the amount of tracer used and the starting time of the experiment.

Uncertainty, imprecision, and the precautionary principle in climate change assessment.

Statistical decision theory can provide useful support for climate change decisions made under conditions of uncertainty. However, the probability distributions used to calculate expected costs in decision theory are themselves subject to uncertainty, disagreement, or ambiguity in their specification. This imprecision can be described using sets of probability measures, from which upper and lower bounds on expectations can be calculated. However, many representations, or classes, of probability measures are possible. We describe six of the more useful classes and demonstrate how each may be used to represent climate change uncertainties. When expected costs are specified by bounds, rather than precise values, the conventional decision criterion of minimum expected cost is insufficient to reach a unique decision. Alternative criteria are required, and the criterion of minimum upper expected cost may be desirable because it is consistent with the precautionary principle. Using simple climate and economics models as an example, we determine the carbon dioxide emissions levels that have minimum upper expected cost for each of the selected classes. There can be wide differences in these emissions levels and their associated costs, emphasizing the need for care when selecting an appropriate class.

Long-term changes in watershed nutrient inputs and riverine exports in the Neuse River, North Carolina.

We compared patterns of historical watershed nutrient inputs with in-river nutrient loads for the Neuse River, NC. Basin-wide sources of both nitrogen and phosphorus have increased substantially during the past century, marked by a sharp increase in the last 10 years resulting from an intensification of animal production. However, this recent increase is not reflected in changes in river loading over the last 20 years. Temporal patterns in river loads more closely parallel short-term changes in point sources and cropland nutrient application despite their overall lower magnitude. Total phosphorus loads have declined at all stations considered, corresponding to a 1988 phosphate detergent ban. Nitrogen load temporal patterns vary by location and the nitrogen fraction considered. The furthest upstream station exhibited nitrogen decreases after the completion of a dam in 1983. At a station just downstream of a rapidly growing urban area, the total nitrogen load has increased since the mid-1980s, primarily as a nitrate concentration increase. This is consistent with concurrent increases in chemical fertilizer use and point source discharges, as well as increased nitrification at treatment plants. This increase in nitrate loading is not reflected at the most downstream station, where no clear nitrogen trends are discernable. The lack of clear downstream nutrient increases suggests that current water quality impairment in the lower river and estuary may result from chronic nutrient overload rather than recent changes in the watershed. If this is true, then the impact of a planned 30% nitrogen loading reduction may not be immediately apparent. We calculate that, given annual variability, detecting a load reduction of this magnitude will take at least four years, and, should nutrients accumulated in the watershed become a significant source, detecting the resulting ecological improvements is likely to take substantially longer.