Adopting a risk-based approach

Ann. N.Y. Acad. Sci. ISSN 0077-8923

ANNALS OF THE NEW YORK ACADEMY OF SCIENCESIssue: New York City Panel on Climate Change 2010 Report

Chapter 2: Adopting a risk-based approach

Gary Yohe1 and Robin Leichenko2

1Department of Economics, Wesleyan University, Middletown, Connecticut. 2Department of Geography, Rutgers University,Piscataway, New Jersey

Address for correspondence: Gary Yohe, Woodhouse/SYSCO Professor of Economics, Wesleyan/UCS, Public Affairs Center328, Wesleyan Station, Middletown, CT 06459. Voice: 860-685-3658. [email protected]

2.1 Adopting a risk-based approach to climatechange2.2 Definitions and fundamentals2.3 Flexible Adaptation Pathways2.4 Application of a risk-based approach for NewYork City2.5 Conclusions and recommendations

Introduction

A significant message accompanying the call forgreenhouse gas mitigation actions from the Inter-governmental Panel on Climate Change (IPCC)2007 Fourth Assessment Report is the increasingneed to identify a decision framework for climatechange that encompasses both mitigation and adap-tation. Through the IPCC, governments have be-gun to acknowledge risk management as a unify-ing theme for both climate change mitigation andadaptation. Their unanimous approval of this mes-sage underscores the importance of providing moreinformation about climate risks (in addition to pro-viding information about impacts and associatedvulnerabilities) and suggests that consideration ofrisk plays a critical role in all facets of climate changedecision making:

“Responding to climate change involves aniterative risk management process that includesboth adaptation and mitigation, and takes intoaccount climate change damages, co-benefits,sustainability, equity and attitudes to risk”(IPCC, 2007c; our emphasis).

These words make clear that governmentsthroughout the world now understand that man-aging the risks associated with climate change willbe a central theme for present and future planning

and policy decisions. For climate change adapta-tion, particularly in a large city like New York, arisk-based approach can serve as a valuable guide topolicy and action. A critical aspect is that it can pro-mote support of expenditure of evermore scarce cityresources to reduce risks from both high-probabilityevents and low-probability events.

This chapter reviews the common underpinningsof a response portfolio that includes both mitigationand adaptation, although the focus of the New YorkCity Panel on Climate Change (NPCC) is on adapt-ing in order to protect existing and anticipated in-frastructure. This dual approach of mitigation andadaptation to climate policy is essential, and riskmanagement concepts can be applied side-by-sideto both types of responses. First of all, the abil-ity of both developed and developing countries toadapt to climate change can be overwhelmed by un-abated climate change (IPCC, 2007b), so mitigationis essential. The implications of mitigation on thetiming and severity of local vulnerabilities must beunderstood so that adaptation can proceed effec-tively and efficiently. Alongside mitigation, adapta-tion also needs to be a priority because the climateis already changing, and mitigation responses maynot begin to moderate projected climate changes forseveral decades. (See Chapter 3 for a fuller discus-sion of climate science.) Mitigation and adaptationare therefore equally essential.

2.1 Adopting a risk-based approachto climate change

To ensure consideration of both simultaneously,we cast adaptation and mitigation into a commonframework within which consideration of long-range goals and their translation into short-term

Ann. N.Y. Acad. Sci. 1196 (2010) 29–40 c© 2010 New York Academy of Sciences. 29

Climate change adaptation in New York City Ch 2. Adopting a risk-based approach

Figure 2.1. Flexible adaptation and mitigation pathways. Adapted from City of London, “The Thames Estuary 2100Plan,” April 2009.

objectives can be accomplished. To make a risk man-agement approach to climate change adaptation op-erational, we must craft iterative and flexible adap-tation plans whose relative efficacy can and will beinfluenced by investment in mitigation.

Figure 2.1 offers a schematic portrait of sev-eral possible futures for interactive climate changeadaptation and mitigation. It presents a societal “ac-ceptable level of risk” as a wavy horizontal line, in-dicating the ever-fluctuating threshold of this con-cept. If we remain on a current risk trajectory withno regard to either mitigation or adaptation, de-picted by the blue line, the acceptable level of riskis crossed relatively soon. The orange line repre-sents setting inflexible adaptation standards donein conjunction with mitigation actions. While thisis better than simply maintaining the status quo,it will still eventually result in crossing into a stateof “unacceptable level of risk.” The yellow line rep-resents creating “Flexible Adaptation Pathways,” asequence of adaptation strategies policy makers,stakeholders, and experts develop and implementthat evolve as our knowledge of climate change pro-gresses. However, without mitigation actions, adap-tation alone will likely not be enough to sustainsociety in an acceptable level of risk. The green,therefore, is better because it combines mitigationactions along with Flexible Adaptation Pathwaysto create a future scenario in which we will re-main below an “acceptable level of risk” indefinitely.

This concept is based on work done by the City ofLondon and the UK Environment Agency for theThames barriers (Lowe, et al.). Further informationabout Flexible Adaptation Pathways is provided inthe Adaptation Assessment Guidebook (AAG) inAppendix B.

2.2 Definitions and fundamentals

Benefit-cost approaches (e.g., Nordhaus, 1991),which entail detailed financial calculations of theadvantages (benefits) and harms (costs) associatedwith specific efforts to address climate change, havebeen a mainstay of economic analyses of climate pol-icy for nearly two decades.1 In recent years, though,many authors and commentators have argued thatcomparisons of benefits and costs are not really ap-propriate in the climate arena. Practitioners withinboth the public and private sectors have come torecognize that some benefits (and even some costs)cannot be monetized.2 They have also recognizedproblems with specifying appropriate discount ratesin order to calculate present-day values for dollarsthat will be spent or saved in the future. Other prob-lems include coping with pervasive, persistent, andmultidimensional uncertainty and accommodatingthe profound distributional consequences of climatechange.

As a result, a risk management approach toconfronting climate change has emerged as a

30 Ann. N.Y. Acad. Sci. 1196 (2010) 29–40 c© 2010 New York Academy of Sciences.

Ch 2. Adopting a risk-based approach Climate change adaptation in New York City

complementary analytic tool that is designed toameliorate or at least account for many of the lim-itations of traditional cost-benefit analysis (IPCC,2007c).3

Risk management approaches to decisions beginwith a statistical definition:

Risk = the probability of an event multiplied bysome measure of its consequence.

Risk-based approaches have gained favor amongmany decision makers because their direct appli-cation can be supported on the basis of the sameeconomic-efficiency criteria (i.e., the maximizationof goods and services provided to society at any givenlevel of resource expenditure), which support otherapproaches to economic analysis. Risk managementis also a technique that policy makers, stakeholders,and finance directors in both public and private sec-tors understand and adopt on a regular basis.

The key insight for all stakeholders is that riskmanagement techniques show how diversificationand risk-spreading mechanisms can improve socialand/or private welfare in situations of profound un-certainty. Diversification cannot eliminate risk com-pletely, and that is why the risk-spreading value ofinsurance is so important. Indeed, insurance is theprimary means by which residual risk can be spreadacross a wider population so that no one person orsmall group of people face disproportionate expo-sures to losses (see Chapter 6 for further discussionof the role of insurance in responding to climatechange). At the most fundamental level, first prin-ciples of economic efficiency support the pursuitof robust responses to uncertain circumstances—responses that work reasonably well across a widerange of possible futures even if they do not workoptimally for any single outcome.4 Since uncertaintyis ubiquitous in regard to climate change and its im-pacts, it is not surprising that deliberations abouthow to respond are now couched explicitly in termsof risk. Moreover, a risk-based approach gives pol-icy makers a method for evaluating hedges—thatis, investments undertaken to reduce or eliminatecertain risks.

The IPCC (2007c) builds on this understandingamong its stakeholders when it asserts that risk man-agement tools and approaches should be used inpublic discussions regarding what to do about cli-mate change. At present, such discussions are oftenstuck in an unproductive standoff between strained

claims of certainty (“the verdict is in, now is thetime for significant action regardless of cost, it won’tcost much anyway, etc. . .”) and impassioned invo-cations that generic uncertainty justifies inaction(“climate change is uncertain, we lack proof, miti-gation is too expensive, research and developmentalone will solve the problem, etc. . .”). Sensible de-cisions and prudent management of risks requireactions that work in the murky arena between thesetwo extremes. Risk management acknowledges thatcoping with uncertainty will play an important rolein both the identification of policy objectives andthe design of specific policy initiatives.

Risk management for mitigation

Many questions about how to apply risk manage-ment knowledge in the climate arena still remain,but this knowledge is evolving rapidly. For exam-ple, the IPCC has concluded that it is “virtuallycertain” that the climate is changing at accelerat-ing rates (IPCC, 2007a),5 and there is “very highconfidence” that anthropogenic emissions are theprincipal cause (IPCC, 2007a).6 We know now thatanthropogenic climate change is the strongest con-tributor to the conditions that created the 2003 heatwave across central Europe (IPCC, 2007b). Thisknowledge alone is sufficient to establish the re-ality and seriousness of the climate change issue.Even though substantial uncertainties persist aboutspecific sources of risk, this knowledge is also suf-ficient to establish the need to respond in the nearterm in ways that will reduce future emissions andthereby ameliorate the pace of future change. Inshort, uncertainty makes the case for near-term ac-tion through hedging against climate risks denomi-nated in terms of both monetary damages and otherindicators, such as billions of additional people whomight be facing hunger, water stress, or hazards fromcoastal storms.7 It also follows that near-term mit-igation actions should begin immediately if we areto minimize the expected cost of meeting the long-term objective to reduce the ultimate rate and mag-nitude of climate change.

Risk management for adaptation

Risk-based approaches clearly support the case formitigation of greenhouse emissions. But questionsremain about whether current understanding of theclimate system can support a similar approach in



Table 2.1. Baseline sea level rise and mean annual changes (relative to baseline years) for New York City

Baseline (1971–2000) 2020s 2050s 2080s

Sea level risea

Central range NA + 2 to 5 in + 7 to 12 in + 12 to 23 in

Rapid ice meltb

Sea level rise NA ∼ 5 to 10 in ∼ 19 to 29 in ∼ 41 to 55 in

aShown is the central range (middle 67%) of values from model-based probabilities, rounded to the nearest inch.b“Rapid ice-melt scenario” is based on acceleration of recent rates of ice melt in the Greenland and West Antarctic icesheets and paleoclimate studies. See Chapter 3 for further details.

the area of climate adaptation. A limited number ofrisk assessments have already compared the costs ofmitigation with the corresponding changes in cli-mate risks, and more are appearing every month.8

Taken together, these studies show that risk as-sessment can productively complement benefit-costcalculations.9

While a risk-based approach can certainly be ap-plied to many types of adaptation decisions, therequisite data may not always exist. Identifying in-formation needs and knowledge gaps is thus onereason why it is essential to begin a process of plan-ning for and prioritizing across adaptation optionsas soon as possible. Table 2.1 shows climate hazardsthat contribute to risk expressed in terms of sea levelrise projections, produced by the NPCC. One NPCCscenario for sea level rise, projected for three timeslices, was derived from global climate models us-ing the methods used in the IPCC (2007a). Becauseof uncertainties associated with that approach, theNPCC provided an additional scenario for sea levelrise that reflected the potential for additional sealevel rise contributions primarily from the Green-land and West Antarctic ice sheets.

Drawing lessons from other risk managementarenas

Offering decision makers information about a pos-sible future that has not yet been modeled satisfacto-rily may sound peculiar. Yet decision makers cannotsimply ignore highly unlikely triggers that mightlead to irreversible impacts of extraordinary conse-quence. It is reassuring, in this regard, to rememberthat the conduct of monetary policy by nationalgovernments frequently represents a real-world il-lustration of how hedging strategies have been em-ployed against large risks whose likelihoods and/or

consequences cannot be estimated. As noted by thenChairman of the Federal Reserve, Alan Greenspan,in his presentation to the American Economic As-sociation (AEA) at their 2004 annual meeting in SanDiego:

“. . .the conduct of monetary policy in theUnited States has come to involve, at its core,crucial elements of risk management. Thisconceptual framework emphasizesunderstanding as much as possible the manysources of risk and uncertainty thatpolicymakers face, quantifying those risks whenpossible, and assessing the costs associated witheach of the risks . . . This framework also entails,in light of those risks, a strategy for policydirected at maximizing the probabilities ofachieving over time our goals. . . policypractitioners under a risk managementparadigm may, at times, be led to undertakeactions intended to provide insurance againstespecially adverse outcomes” (Greenspan, 2004;emphasis added).

In other words, we must sometimes take into ac-count low-probability but high-risk outcomes whendeveloping risk management strategies even in cir-cumstances when we know little about likelihood. Riskmanagement strategies used in the monetary realmto cope with threats, such as deflation, have a directparallel to the issue of climate change, where low-probability but high-consequence events representa very large risk. A risk management approach toclimate change supports the expenditure of someresources to reduce a significant risk (despite a lowprobability) in the future, such as designing contin-gency plans against permanent inundation of criti-cal infrastructure due to rising sea levels related torapid melting of the West Antarctic and Greenland



ice sheets, as illustrated in Table 2.1. A hedging ap-proach suggests that climate adaptation decisionscan usefully be informed by consideration of risk.

2.3 Flexible Adaptation Pathways

Research and policy communities are beginning toacknowledge the ineffectiveness of instituting an in-flexible set of climate policies, no matter how strin-gent. The multiple facets of climate change hazards,impacts, and adaptation strategies, as well as theuncertainty associated with each, limit our abilityto create one standard timeless policy that will workfor all situations. Rather, each aspect of climate haz-ards, impacts, and adaptation needs to be continu-ally considered and re-evaluated as new informationcomes to light. An effective climate change policy isan iterative one that considers and incorporates thisnew information at regular intervals.

Many uncertainties about the earth’s climate sys-tem are so profound that they may never be resolvedin a timely fashion. A key climate change scienceexample is climate sensitivity, which is defined asthe increase in global mean temperature associatedwith a doubling of greenhouse gas concentrationsfrom pre-industrial levels. Current understandingputs the range of this critical parameter between1.5◦C and more than 5◦C, and it is now widely ac-cepted that substantial and timely reductions in thisrange through advances in fundamental scientificunderstanding are quite unlikely.10 Roe and Baker(2007) show, for example, that “the probability oflarge temperature increases” is “relatively insensitiveto decreases in uncertainties associated with the un-derlying climate processes.” Allen and Frame (2007)further argued that it is pointless for policy makers tocount on narrowing this fundamental uncertainty.

Other layers of uncertainty around climatechange planning to consider are those associatedwith impacts, adaptations, adaptation policies, andsocietal factors. Climate hazards will have variousimpacts on critical infrastructure, some of whichare more well documented than others. For exam-ple, increased heat will pose larger strain on theenergy grid, but the thresholds for sustained pres-sure are dependent on several factors ranging fromthe relative prevalence of alternative energy sourcesto the demand for air conditioning on any given day.There are also uncertainties around adaptations thatwill be influenced by unforeseen technological ad-

vances or potential unintended co-benefits relatedto other environmental stresses. Adaptation strate-gies will continue to be refined as lessons are sharedamong stakeholders and municipalities. Knowledgeregarding strategy development is another uncer-tainty in climate change adaptation planning, sinceinitial efforts are just getting under way, and evalu-ations have not yet been done. Finally, there are un-certainties regarding future social factors that willinfluence climate change adaptation planning, suchas population trends and economic conditions.

As a result of these layers of uncertainty, a policyresponse that delays immediate action in favor ofwaiting for the results of a “crash research program”to narrow the range does not appear to be viable.Moreover, decision makers and resource managersshould not anticipate that inflexible long-term cli-mate change policies will be set in place any time inthe near future. Therefore, it follows that we mustbegin to construct a process by which interim targetsand objectives for both mitigation and adaptationwill be informed by long-term goals in ways thatappropriate adjustments will be as efficient and astransparent as possible.11 This is a simple conclusionthat makes sense, but issues abound as soon as onebegins thinking about how to make it operational.

As urban managers think about designing re-sponses to climate change that incorporate hedg-ing decisions, the role that flexibility plays underconditions of uncertainty is critical. Indeed, manypolicy alternatives would be equivalent in a world ofperfect certainty.12 In the real world, however, moreflexible polices are generally much more robust thanless flexible policies when uncertainties are impor-tant (Box 2.1). Yet, there are limits to this advantage.Flexibility in one arena can impose costs elsewherethat must be compared with the associated efficiencygains.

Box 2.1 Designing iterative climatepolicy—the car on a dangerousroad analogy

Parson (2008) divides the problem of designing aniterative process for climate policy into two cate-gories.13 In the first, likened to guiding a car down adangerous road when the driver understands howthe steering wheel and brakes work, he assumes



that well-defined and well-understood levers areavailable for implementing short-term policies andmaking appropriate mid-course corrections. In thesecond, the driver either does not have a steeringwheel and brakes or, only slightly less unsettling,will not understand how they work without somepreliminary experimentation during the early partof the trip. In such a case, trying some mod-est experiments with an eye toward understand-ing the policy-lever mechanism would certainly beprudent.

Even in the world of the first category, assum-ing that policy makers are equipped with goodsteering and brakes related to climate change,the situation is not so straightforward. Effectivemonitoring mechanisms and a transparent adjust-ment processes must be established to (1) monitorprogress toward interim targets for both mitiga-tion and adaptation, (2) monitor the robustnessand appropriateness of long-term goals, and (3) de-termine how frequently to undertake adjustmentson the basis of what information can be expectedand when it might be distinguished from statis-tical noise. Responding too frequently or too ag-gressively is extremely expensive, yet respondingtoo infrequently or too cautiously can also imposecosts.

Unfortunately, the second case that assumes im-precise or even very preliminary understanding ofhow the policy levers might work (especially to-gether) is probably a better description of the stateof knowledge. All of the issues raised above pertain,therefore, but an entirely new set of monitoringmechanisms now designed to provide evidence ofexactly how, why, and when policies do and do notwork must be added to the list. In this context, someadaptive management (trying policy experimentsdesigned explicitly to elicit maximum informationabout the policies themselves) could be importantcomponents of fruitful near-term response port-folios. The National Research Council (2009) pro-vides a thorough description of this technique.

As illustrated in Box 2.2, the ongoing global finan-cial crisis offers some important lessons about howto respond iteratively to climate change using a risk-based approach. The enormous uncertainty regard-ing understanding of the climate system, impacts,adaptation, and our socio-economic future meansthat climate policy must deal with correspondinglyenormous complexity. The complexities include im-

proving knowledge of what can be monitored, whatis causing climate impacts, how those impacts canimpose significant vulnerability on natural and hu-man systems, and how well the responses actuallywork. Conflicting explanations of climate scienceare akin to those in economics. This means that de-cision mechanisms must cope with competing in-dices of change as they try to monitor what climateimpacts are occurring and what they mean in termsof economic and social vulnerabilities in the future.

As noted explicitly in IPCC (2007c), the thresh-olds of dangerous interference across key vulnerabil-ities cannot all be calibrated in terms of a commonmetric. It follows that the thresholds of “dangerousanthropogenic interference” that are to be the basisfor action drawn from Article 2 of the United Na-tions Framework on Climate Change (IPCC 2007c)are still not well defined.14 Nonetheless, we knowthat the risks of climate change are potentially largeeven if we cannot estimate all probabilities or cali-brate all potential consequences in monetary terms.We also know that the possibility of a “bail-out” isquite low.

Box 2.2 Lessons for climate policyfrom the 2008–2009 globalfinancial crisis

Domestic and international banking and finan-cial systems offer some examples of macroscaleiterative policy making, such as have been pro-posed for climate change responses (e.g., Stiglitzand Walsh, 2005). Central banks, for example, fre-quently set trajectories for growth in the moneysupply when they expect normal economic activ-ity over a foreseeable future—a time period thatdefines when the next round of trajectory deci-sions will be taken. Since they do not have ex-act control over the money supply, however, theyalso surround these trajectories with cone-shapedboundary thresholds—thresholds that trigger well-defined but immediate responses in advance of theanticipated time frame should the money supplyclimb above or fall below the intended range (seeFig. 2.2). Central banks can also monitor exchangerates in exactly the same way.

In both cases, actors across the economy knowhow the central bank will conduct its analyses in an-ticipation of making scheduled policy adjustments.



They can anticipate much of what will happen dur-ing those adjustments and begin to make appropri-ate changes in their own behaviors in advance of thepolicy change. These actors also understand whatthe banks will do if unanticipated adjustments areinitiated by crossing the trigger threshold. They candetect early warning signs so that they can beginto respond in advance of these more unexpectedevents. Transparency in the process can, in otherwords, lessen the costs of planned or unplannedpolicy adjustments (i.e., the backseat passengersare not as vocal as they would be otherwise).

The experiences of these monetary structuressuggest at least three guidelines that can be ap-plied to climate change policies: (1) keep long-term target options open as long as possible bysetting decision-triggering thresholds, (2) work tominimize the adjustment costs of regularly imple-mented adjustment periods, and (3) minimize ad-ministrative complexity in both adjustment pro-cesses by making them as transparent and aspredictable as possible.

Events in the financial markets that marked thesecond half of 2008—including dramatic reduc-tions in stock valuations, government takeover ofbanks, and temporary freezes in credit markets—clearly indicate that difficulties can still arise, es-pecially when the assumption of well-defined pol-icy levers and well-understood monitoring mech-anisms breaks down. Central banks may have beenmonitoring the money supply, inflation and ex-change rate fluctuation, but they were not keepingtrack of complexity in financial instruments thatspread enormous risk across a range of unsuspect-ing and otherwise debt-burdened citizens and in-stitutions. Difficulties of this sort are perhaps evenmore ubiquitous and dangerous in the case of cli-mate change.

Regularly scheduled “mid-course corrections,”similar to the “recalibrated” points depicted inFigure 2.2, can be envisioned for an iterative cli-mate adaptation process. This is shown in Figure 2.1where the “corrections” might come in the formof updated climate information, new technologi-cal advancement, or a new policy that would serveto readjust the risk trajectory back to an accept-able level. If the climate hazards that create vulner-abilities change as anticipated, then no adjustmentwould be required. If they are observed to be mov-ing more quickly than expected (but still within a

Figure 2.2. Representative iterative adjustments in thegrowth of the money supply.

range of tolerability), then some effort to slow thepace of change or reduce sensitivity would be imple-mented in due course as scheduled. If, however, theyare observed breaching the threshold of tolerablepace, then earlier adjustments would be required.In Figure 2.1 these are represented as the dips in the“saw-toothed” trajectories.

This Flexible Adaptation Pathways concept wasput into practice in the form of an iterative decisiontree for protecting London from coastal storms cal-ibrated against sea level rise, shown in Figure 2.3.It shows that the Greater London Authority hasidentified a series of escalating responses that be-gin with raising defenses along the Thames Riverbut nonetheless include the possibility of construct-ing a new barrage at the river’s mouth. For mod-est sea level rise, a sequence of responses has beendeemed possible even if maximum anticipated sealevel rise grows gradually over time. For more severecases with significantly higher flooding risk earlierin the century, however, larger and more expensive



Figure 2.3. Iterative adaptation strategies to protect London from coastal storms. Source: Greater London Authority.

construction projects including early commitmentto a new barrage are thought to be necessary. Deci-sions about timing and monitoring have yet to befinalized, but the Authority clearly envisions an iter-ative process whose ultimate evolution will be con-tingent on how the future unfolds. Their capac-ity to do so is, in every case, enhanced by strengthin the underlying determinants of adaptive capac-ity, including explicit recognition of causal links,well-defined understanding of the need to spreadwhat could be significant risks, and consolidatedsocial capital embodied in a central planning anddecision-making institution. Such a risk manage-ment approach to the climate change adaptationprocess is also being applied in the case of New Yorkthrough the NPCC and Task Force process, basedon its own geographic setting, climate risks, andadaptive capabilities.

2.4 Application of a risk-based approachfor New York City

The City of New York is following a risk-based ap-proach as it develops plans to help protect the in-

frastructure in and around the city from increasingvulnerability to climate change. The City’s risk man-agement approach simultaneously combines bothmitigation and adaptation. Mitigation goals havealready been adopted within PlaNYC, including re-duction of the City government’s greenhouse gasemissions by 30% below 2005 levels by 2017, andthe City has conducted emissions inventories for anumber of infrastructure sectors (City of New York,2009). The City has been motivated in its work onmitigation and adaptation by the perception of risk.

2.5 Conclusions and recommendations

The major conclusion to be drawn from this briefreview of current thinking about how to respond tothe various risks associated with climate change issummarized most succinctly in the initial quotationfrom IPCC (2007c). To paraphrase:

Responding to climate change requires adoptinga risk management approach by which bothadaptation and mitigation can become part ofan iterative process that recognizes explicitly the



need for midcourse corrections as ourunderstanding of the underlying science and itstranslation into climate variability as well asclimate impacts evolves.

Any iterative, or Flexible Adaptation Pathways, pro-cess must recognize with equal care the multi-ple dimensions of climate hazards, impacts, adap-tations, economic development, and other socialfactors. These include technological advancements,programs designed to achieve socio-economic goalsthat are expressed in terms of sustainability and eq-uity, and the efficacy over time of efforts to slow thepace of anthropogenic sources of climate change.This is true in general, and it is true for New YorkCity.

To incorporate this process into their routine op-erations, governments and other institutions mustwork to establish cooperative mechanisms by whichthey can track, analyze, and project key manifesta-tions of climate change, impacts, and adaptationsto reduce both exposure and sensitivity to thoseimpacts, and the inevitable interaction of these re-sponses with other private and public initiatives.

Much of the literature devoted to responding toclimate change has focused on the potential for cli-mate change mitigation, particularly on options thatseem to be win–win opportunities for city managers,because they work to reduce greenhouse gas emis-sions and generate economic cost savings. Adap-tation to climate change has been more difficultto motivate in part because proponents have hadto navigate contested political terrains and becausemany options have offered little in the way of imme-diate benefits. The results of the NPCC work showthat a very different picture may be emerging. Tosome degree, a risk-based approach changes the un-derlying decision calculus because, at the very least,it leads immediately to consideration of adaptationsthat complement existing risk and hazard manage-ment strategies.

This synergy strongly suggests that decision mak-ers develop a process by which climate protectionlevels derived from existing standards and codesand defined through the lens of maintaining so-cially tolerable levels of risk are translated into newdesign decision-support tools and revised design pa-rameters (CPL, Appendix C). However, this processneeds to recognize that it is operating in a dynamic

environment that will evolve over time. As a result,design standards, like those that reflect the risk ofoperating within a 100-year flood zone for coastaland inland storms, may be adjusted systematicallyto accommodate and even to anticipate changingclimatic conditions.

Iterative processes for adaptation operating in adynamic environment should try, whenever possi-ble, to define Flexible Adaptation Pathways. Policymakers can identify tipping points in natural and so-cial systems, perhaps described in terms of criticalthresholds of irreversible or particularly deleteriousimpacts, based on scientific research. These can bean essential part of designing these pathways, butonly if they can be expressed in terms of timely“triggers” that determine when an adaptation mea-sure is required. This represents a suite of possiblefuture studies centered on the notion of evaluat-ing the outcomes of the risk management approachand the potential of enhancement of existing de-sign standards and policies as part of an effectiveadaptation strategy.

New York City has embraced this conclusion and,perhaps more importantly, has recognized that Flex-ible Adaptation Pathways will be feasible only if cli-mate change monitoring programs are established(see Chapter 7). These programs, designed with thehelp of ongoing consultation with experts, will trackand analyze the trajectories of change for key climatechange variables, their associated impacts, and theefficacy of existing adaptation processes in the con-text of evolving scientific knowledge.

Armed with this knowledge, concentrated at-tention can, on the one hand, be paid to nearand medium-term impacts caused by incrementalchanges in, for example, temperature and precip-itation. Meanwhile parallel attention can be paidto the possibility that low-probability but high-consequence events may occur (or become morelikely). It is in implementing responses along thissecond tract that it is necessary (1) to identify, char-acterize, and understand nonlinear tipping pointsand impact triggers, and (2) to devise decision path-ways that suggest when and how to adopt differ-ent types of adaptation measures. In turn, theseconditions will require constant, dynamic evalu-ation. It will be responsible for New York Citystakeholders to evaluate the ongoing change andthe effectiveness of their risk management–based



responses in order to seize opportunities and makecorrections.

Endnotes1Circular A-4 (White House, 2003), the federal di-

rective under which cost-benefit analyses have beenundertaken to evaluate the effectiveness of climatechange policies, was distributed by the Office ofManagement and Budget to update long-standinginstructions for environmental assessments that de-fined the standards for “good regulatory analysis”—exercises that work from statements of need andexplorations of alternative approaches to produceevaluations of the “benefits and costs—quantitativeand qualitative—of the proposed action and themain alternatives. . .” The Circular suggests how toidentify areas where government action may be re-quired, but it warns against unwarranted interven-tion in the marketplace by leading with an explicit“presumption against economic regulation.” Mostof the text, though, is dedicated to illuminating “bestpractices” for circumstances in which this presump-tive hurdle has been overcome. It begins by high-lighting benefit-cost and cost-effectiveness analy-ses as the “systematic frameworks” within which toidentify and to evaluate the likely outcomes of alter-native regulatory choices. The Congressional BudgetOffice (2005) amplified these points.

2Critiques of relying too heavily on limitedbenefit-cost analyses include Tol (2003) and Yohe(2004, 2006).

3The foundations for the results that follow canbe found in Raiffa and Schlaiffer (2000). While un-derstanding of the factors that create risks havelong been a mainstay in the natural hazards liter-ature (e.g., Wisner et al., 2004), this literature isprimarily focused on identifying technological, in-stitutional, socio-economic and political factors thatinfluence the vulnerability or resilience of individ-uals or socio-ecological systems to extreme events(Leichenko and O’Brien, 2008).

4Risk analyses have demonstrated how the deci-sions we make are critically dependent on the sub-jective prior distributions with which we weightthe relative likelihoods of future outcomes andhave thereby demonstrated how aversion to risk in-fluences the value of information. Economic effi-ciency establishes criteria by which we could po-tentially achieve maximal welfare from a limited

number of resources by most effectively allocatingtheir employment across wide ranges of competingdemands.

5According to the IPCC conventions, “virtuallycertain” implies that there is more than a 99% prob-ability that an outcome will occur (IPCC, 2007a).

6“Very high confidence” means that there is atleast a 9 out of 10 chance of being correct (IPCC,2007a).

7Hedging involves sacrificing some economicvalue relative to the optimum across most of thepossible futures facing a society to reduce either thelikelihood or the consequence of a possible futurethat is far less benign.

8Mastrandrea and Schneider (2004), for example,used the DICE economic model from Nordhausand Boyer (2000) to assess the costs of avoidingdangerous climate change as defined by assump-tions drawn from the IPCC’s Third AssessmentReport. Webster et al. (2003) used an integratedmodel of intermediate complexity to quantify thelikelihood of global warming in 2100, beginningwith projections of population, economy and en-ergy use. Jones (2004a, 2004b) and Wigley (2004)both presented frameworks that probabilistically re-late CO2 concentrations at stabilization with equi-librium temperature, but treat neither the costs ofmitigation nor the benefits of avoiding damages.Brian O’Neill edited an entire volume of papers de-signed to explore the role of learning in setting long-term mitigation strategies; see O’Neill (2008) for hisoverview paper. Schlesinger et al. (2006) adopted amore focused approach by tracking the likelihoodof a collapse of the Atlantic thermohaline circu-lation (the THC) over the next one or two cen-turies under a variety of mitigation assumptionsusing three alternative representations of underly-ing uncertainty in climate sensitivity and in threefundamental parameters of a simple, reduced-formocean model. Zickfeld and Bruckner (2008) fol-lowed with an investigation of the implications of al-ternative emissions corridors on the same THC riskprofile using an alternative ocean model. In eachof these cases, the idea was to create risk profilesand to explore their sensitivities to various levels ofmitigation.

9The studies portray cumulative probability dis-tributions of key vulnerabilities based on subjectivejudgments of the relatively likelihoods of variousoutcomes or ranges of critical parameters.



10IPCC (2007a) reports, for example, that “theequilibrium climate sensitivity is a measure ofthe climate-system response to sustained radiativeforcing. It is not a projection but is defined as theglobal average surface warming following a dou-bling of carbon dioxide concentrations. It is likelyto be in the range 2◦C to 4.5◦C with a best es-timate of about 3◦C, and is very unlikely to beless than 1.5◦C. Values substantially higher than4.5◦C cannot be excluded, but agreement of mod-els with observations is not as good for thosevalues.”

11See, for example, Yohe et al. (2004).12See, for example, Weitzman (1974) where the

difference between a price control and a quan-tity control (read tax and “cap-and-trade” quotas)emerge only when business can respond to changesin their environment that lie beyond the capac-ity of the regulator to monitor. Under perfect cer-tainty (symmetric information), there is an equiv-alent price for every quota. Under uncertainty, theprice allows more business response than the quota(a benefit for business), but consumers suffer fromthe resulting variability in supply. The choice be-tween the price and the quantity control thereforeturns on whether the benefits to business exceed thecosts to consumers.

13His thoughts, in this regard expressed in thebroader context of constructing international pol-icy agreements, can be found in Parson (2008); ref-erence to adaptive mitigation is found on pages 3and 4.

14As noted on page 40 of IPCC (2007c), Article2 of the UNFCCC states that: “The ultimate objec-tive of this Convention and any related legal instru-ments that the Conference of the Parties may adoptis to achieve, in accordance with the relevant provi-sions of the Convention, stabilization of greenhousegas concentrations in the atmosphere at a level thatwould prevent dangerous anthropogenic interfer-ence with the climate system. Such a level shouldbe achieved within a time frame sufficient to allowecosystems to adapt naturally to climate change, toensure that food production is not threatened and toenable economic development to proceed in a sus-tainable manner.” The Synthesis Report continuesby noting that “determining what constitutes ‘dan-gerous anthropogenic interference with the climatesystem’ (in relation to Article 2) involves value judg-ments” that science cannot make. It suggests that

“science can (nonetheless) support informed deci-sions on this issue, including by providing criteriafor judging which vulnerabilities might be labeledkey.” Chapter 19 in IPCC (2007b; our emphasis)offers a set of such criteria.

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Adopting a risk-based approach

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