Ecological EconomicsLecture 13

Ricardo da Silva VieiraResearcher/Consultant

Tiago DomingosAssistant Professor

Environment and Energy SectionDepartment of Mechanical Engineering

Doctoral Program and Advanced Degree in Sustainable Energy SystemsDoctoral Program in Mechanical Engineering

Doctoral Program in Environmental Engineering

Knowledge, Ethics, Discounting and Climate Change I

• “Spash says that the standard economic approach used by Stern shifts attention from ‘value conflicts’ and issues of distribution, uncertainty and ethics, favouring economic modeling as a means to provide a simplified solution to a complex problem.”– Cátia and John

• Choosing a social discount rate “is inherently an ethical judgment that requires comparing the well-being of different people”– António and Pedro

• “However, how can we predict what their future preferences might be?”– Cátia and John

Knowledge, Ethics, Discounting and Climate Change II

• “ (…) the discount rate is (…) the market rate of return on safe investments plus an appropriate risk premium for uncertainty (Howarth and Norgaard)– António and Pedro

• “ (…) this theoretical framework implies that the risk premium should not be positive for precautionary actions such as buying insurance.” (Howarth and Norgaard)

• “ (…) we should multiply the cost or benefit of an outcome by the probability of its occurring. Any probability less than 1 is a form of discounting.” Caney (2009)– Carlos e Rebeca

General Comments

• Very interesting references obtained

• But inadequate references

• Lack of connection to the material on Green GDP

Overview

I. Sustainability appraisal methods

II. MCDAs

III. Ethics in sustainability appraisal processes

IV. Exercise: Lewis Wind Farm, Scotland

V. Discussion

I. Appraisal Methods

Methods that allow for comparing a set of alternatives to address a given problem:

•…

Family of appraisal methods

CBA Cost-benefit analysis, cost-effectiveness analysis, financial analysis

Env. Assess. Environmental impact assessment, strategic environmental assessment, sustainability appraisal

Metabolic Analyses

Ecological footprint, material flow analysis, energy/emergy/exergy analyses …

LCAs and EMS Life cycle assessment and environmental management systems

Risk Assessments Risk assessment, Monte Carlo modelling, aggregative Bayesian methods, statistical errors, levels of proof …

I. Appraisal Methods

• Dealing with high

uncertainty

– facts are uncertain,

– value judgments are

inevitable

• Values in dispute:

– ambiguity (what is

affected)

– conflicting priorities

Problems with current approaches

I. Appraisal Methods

• When we want to satisfy more than one goal

– Goals in different units

– Qualitative and quantitative goals

• Dealing with trade-offs between different goals

– Which theories are used? Why? are they relevant? where is objectivity?

• They do not necessarily help in…

– … identifying and resolving potential conflicts

– … bringing transparency and accountability to the decision-making process

Problems with current approaches

I. Appraisal Methods

• Establish preferences between options based on a set of objectives and to the

extent the options satisfy these objectives

• Helps with large amounts of complex data

• Helps to identify a most preferred option, the least preferred option, rank

options, short-list a limited number of options, or to distinguish between

acceptable from unacceptable possibilities

An overview

II. MCDA

• It is open and explicit:

– Objectives and criteria are open to analysis and change,

– Same with scores and weights

• Provides audit trails

Advantages

II. MCDA

Definition of the object of

decision

Scoring(impact matrix)

A set of Alternatives

Definition of a set of Criteria

A set of Criteria

Aggregation of scores

Aggregation procedures

Direct analysis of the impact matrix

Linear additive models (incl MAUT) - weights

n

jjjaav vw

1

)()(

Performance of option a

Total number of criteria

Performance of option a in criteria j

Weight of criteria j

Steps in the MCDA

II. MCDA

Definition of the object of

decision

Scoring

A set of Alternatives

Definition of a set of Criteria

A set of Criteria

Aggregation of scores

Aggregation procedures

Direct analysis of the impact matrix

Linear additive models (incl MAUT) - weights

Steps in the MCDA

II. MCDA

AHP (binary comparison) - weights

Outranking methods

Qualitative methods

Fuzzy sets

Which alternatives? Which scale? Which time-horizon?

Which criteria? Which scale? Which time-horizon?

Which scores? Average? Marginal? Best-case scenario? Worst-case scenario? How certain are crisp values? What can affect the scores and in how much?

According to who’s preferences? General economic or ecological theories? Local or global priorities? Perceptions by decision-makers or representatives of society?

An overview

III. Ethics in the Decision-making Process

Definition of the object of

decision

Scoring

Definition of a set of Criteria

Aggregation of scores

Scores

A set of Alternatives

A set of Criteria

Aggregation procedures

• If the process is being driven by technical and/or specialist knowledge, then alternatives will tend to privilege technology based strategies.

• Politically contentious options, or options without organised lobby groups, may be neglected.

• Participants without specialist knowledge will require access to additional information before defining a range of options.

Participation

Who?

How?

When?

E.g.,

Three-stage multicriteria evaluation

Social multicriteria evaluation

Multicriteria mapping

Deliberative mapping

An overview

III. Ethics in the Decision-making Process

Transparency

• To be located at the Isle of Lewis, Scotalnd, an island with several sites of natural heritage, and special protection areas

• The Lewis Wind Farm was proposed to be the biggest wind farm in Scotland

• The scheme was planned to be built on a Special Protection Area

• The original proposal was for 234 wind turbines with 702 MW installed capacity

• The revised proposal consisted of 181 wind turbines, with 651 MW installed capacity

Lewis Wind Farm

IV. Exercise

Define Alternatives

Define Criteria

Define Scores

Define weights

Determine Performance

IV. Exercise

• How different were the results?

– Overall performance, criteria used, weights?

• Are all criteria legitimate? Did you include all? Where you thinking local?

Global?

• How certain are you on the scores? Did you use marginal or average values?

• What do you think is missing in the appraisal?

• How do you think this could be dealt with?

• What advantages/disadvantages MCDAs have?

V. Discussion

• What do you think is missing in the appraisal?

• How do you think this could be dealt with?

• What advantages/disadvantages MCDAs have?

V. Discussion