Uncertainty Management and the Dynamic Adjustment of Deep Decarbonization Pathways

This essay proposes a framework for addressing dynamic management issues related to decarbonization pathways in order to limit the need for adjustment, and its cost, over time. When choosing a pathway as more desirable, it is important to keep in mind that each decarbonization option relies on the implementation of specific policies and instruments. However, given structural effectiveness and timing uncertainties specific to each policy option, they may fail to deliver the expected outcomes in time. The possibility of diverging from one decarbonization trajectory to another without incurring excessive costs should therefore be a strategic element in the design of an appropriate decarbonization strategy. Such an adaptive pathway strategy should combine long-lived incentives to form consistent expectations, as well as adaptive policies.