Valuing uncertainty part II: the impact of risk charges in dealing with time issues in lifecycle analysis and GHG accounting

Background: We have greater certainty for what has happened in the past than for what will happen in the future. Uncertainty on the impact and value of emissions can be very large. Given all of the elements of uncertainty, we are challenged to set global targets for limiting the environmental impact of emissions, to distribute those targets among the many parties responsible for emissions, to evaluate the trajectories toward targets, to understand the risk involved in not meeting targets, to motivate the collective efforts and burden sharing or trading, and to verify that targets have been achieved. We need a clear and consistent framework for dealing with uncertainty and in this article we use the notion of a risk charge on uncertainty to investigate issues of time in GHG and lifecycle analysis accounting. Results: We address critical issues of short-term storage, time horizons, permanence, trading agreements and model error, and explain the consequences of a risk charge on the associated uncertainties. Conclusions: We demonstrate here how the framework we have built naturally extends to address most types of issues that might arise in placing a value on the uncertainty of GHG emissions, and in quantifying management trade-offs and policy strategies for mitigation and adaptation of climate change.