Valuing uncertainty part I: the impact of uncertainty in GHG accounting

Abstract

Background: It has become increasingly evident in the literature that a correlation needs to be made between uncertainty in GHG emissions estimates and the value of emissions. That is, emissions with larger uncertainty are less desirable than those with smaller uncertainty. In fact, concrete advances in trade and reduction agreements depend on finding a set of methodologies for dealing with uncertainty that is acceptable to all parties. Results: Here, we assume that a cost, or value, can be assigned to changes in GHG emissions. As this cost can be assigned to emissions (or sequestrations), then so must a cost be assigned to the associated uncertainty. Standard methods from the actuarial sciences provide an approach to this valuation and we apply these same ideas to dealing to GHG accounting. Conclusion: This framework will allow us to address issues related to agreement structures and motivations for reducing uncertainty, and will enable objective comparisons between options.