Policy Should Incorporate the Cost of Error and Uncertainty in Estimates of Fuel Carbon Intensity

Abstract

Implementation of many policies intended to reduce fuels’ contribution to global warming require an estimate of the global warming intensity (GWI) of various fuels. Determining the climate effect of a direct substitution of fuels is not the same as determining the official value of each fuel’s GWI used to implement the policy. Choosing the second, which depends in part on estimates of the first and their intrinsic uncertainty, is a decision that should reflect the shape of the probability distribution of the first and of the cost of error (the difference between the chosen value and the ‘real’ value. Decision analysis helps clarify the difference between these GWI’s, how they relate to each other, and how standard engineering practice like a safety factor applies to the regulator’s decision.