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Agreeing on robust decisions : new processes for decision making under deep uncertainty

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  • Kalra, Nidhi
  • Hallegatte, Stephane
  • Lempert, Robert
  • Brown, Casey
  • Fozzard, Adrian
  • Gill, Stuart
  • Shah, Ankur

Abstract

Investment decision making is already difficult for any diverse group of actors with different priorities and views. But the presence of deep uncertainties linked to climate change and other future conditions further challenges decision making by questioning the robustness of all purportedly optimal solutions. While decision makers can continue to use the decision metrics they have used in the past (such as net present value), alternative methodologies can improve decision processes, especially those that lead with analysis and end in agreement on decisions. Such"Agree-on-Decision"methods start by stress-testing options under a wide range of plausible conditions, without requiring us to agree ex ante on which conditions are more or less likely, and against a set of objectives or success metrics, without requiring us to agree ex ante on how to aggregate or weight them. As a result, these methods are easier to apply to contexts of large uncertainty or disagreement on values and objectives. This inverted process promotes consensus around better decisions and can help in managing uncertainty. Analyses performed in this way let decision makers make the decision and inform them on (1) the conditions under which an option or project is vulnerable; (2) the tradeoffs between robustness and cost, or between various objectives; and (3) the flexibility of various options to respond to changes in the future. In doing so, they put decision makers back in the driver's seat. A growing set of case studies shows that these methods can be applied in real-world contexts and do not need to be more costly or complicated than traditional approaches. Finally, while this paper focuses on climate change, a better treatment of uncertainties and disagreement would in general improve decision making and development outcomes.

Suggested Citation

  • Kalra, Nidhi & Hallegatte, Stephane & Lempert, Robert & Brown, Casey & Fozzard, Adrian & Gill, Stuart & Shah, Ankur, 2014. "Agreeing on robust decisions : new processes for decision making under deep uncertainty," Policy Research Working Paper Series 6906, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6906
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    References listed on IDEAS

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    Cited by:

    1. Decker, Christopher, 2018. "Utility and regulatory decision-making under conditions of uncertainty: Balancing resilience and affordability," Utilities Policy, Elsevier, vol. 51(C), pages 51-60.
    2. Grzegorz Peszko & Dominique van der Mensbrugghe & Alexander Golub & John Ward & Dimitri Zenghelis & Cor Marijs & Anne Schopp & John A. Rogers & Amelia Midgley, 2020. "Diversification and Cooperation in a Decarbonizing World," World Bank Publications - Books, The World Bank Group, number 34011, December.
    3. Adrien Vogt‐Schilb & Stephane Hallegatte, 2017. "Climate policies and nationally determined contributions: reconciling the needed ambition with the political economy," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 6(6), November.
    4. Baker, Erin & Bosetti, Valentina & Salo, Ahti, 2020. "Robust portfolio decision analysis: An application to the energy research and development portfolio problem," European Journal of Operational Research, Elsevier, vol. 284(3), pages 1107-1120.
    5. Stanton, Muriel C. Bonjean & Roelich, Katy, 2021. "Decision making under deep uncertainties: A review of the applicability of methods in practice," Technological Forecasting and Social Change, Elsevier, vol. 171(C).
    6. Bhave, Ajay Gajanan & Conway, Declan & Dessai, Suraje & Stainforth, David A., 2017. "Barriers and opportunities for robust decision making approaches to support climate change adaptation in the developing world," LSE Research Online Documents on Economics 68318, London School of Economics and Political Science, LSE Library.
    7. Moallemi, Enayat A. & Elsawah, Sondoss & Ryan, Michael J., 2020. "Robust decision making and Epoch–Era analysis: A comparison of two robustness frameworks for decision-making under uncertainty," Technological Forecasting and Social Change, Elsevier, vol. 151(C).
    8. World Bank, 2015. "Agricultural Risk Management in the Face of Climate Change," World Bank Publications - Reports 22897, The World Bank Group.
    9. Dittrich, Ruth & Wreford, Anita & Moran, Dominic, 2016. "A survey of decision-making approaches for climate change adaptation: Are robust methods the way forward?," Ecological Economics, Elsevier, vol. 122(C), pages 79-89.
    10. Augustinas Maceika & Andrej Bugajev & Olga Regina Šostak & Tatjana Vilutienė, 2021. "Decision Tree and AHP Methods Application for Projects Assessment: A Case Study," Sustainability, MDPI, vol. 13(10), pages 1-33, May.
    11. Rutger Dankers & Zbigniew W. Kundzewicz, 2020. "Grappling with uncertainties in physical climate impact projections of water resources," Climatic Change, Springer, vol. 163(3), pages 1379-1397, December.

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    Keywords

    Climate Change Economics; Climate Change Mitigation and Green House Gases; Science of Climate Change; Transport Economics Policy&Planning; Debt Markets;
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