Download all Technical Policy Briefing Notes in a single ... - Mediation

Key Messages• There is increasing interest in the appraisal ofoptions, as adaptation moves from theory topractice. In response, a number of existingand new decision support tools are beingconsidered, including methods that addressuncertainty.• The FP7 MEDIATION project has undertaken adetailed review of these tools, and has testedthem in a series of case studies. It hasassessed their applicability for adaptation andanalysed how they consider uncertainty. Thefindings are including on the MEDIATIONAdaptation Platform and summarised in a setof policy briefing notes.• One of the tools recommended for adaptationis Portfolio Analysis (PA).• PA is a tool that helps in the design andevaluation of portfolios, i.e. in selecting a setof options which (together) are effective over arange of possible future climates, rather thana single option best suited to one possiblefuture.• The approach allows the identification ofefficient portfolios, i.e. those that have thehighest possible expected return for a givenrisk, or the lowest degree of risk for a givenrate of return. This then provides the investoror decision maker with a choice of alternative(efficient) portfolios, which they can choosefrom based on their risk-return preferences.• The approach has considerable potential foraddressing climate change uncertainty,through the use of portfolios of options ratherthan single solutions. It has a high resonancewith the concepts of iterative riskmanagement in its encouragement ofdiversification (a key part of riskmanagement). The approach can be usedwithin an economic analytical framework andcan also assess portfolios in terms of nonmonetary(physical) effectiveness.• The review has considered the strengths andweakness of the approach for adaptation. Themain strength of portfolio analysis is that itprovides a structured way of addressing(climate change) uncertainty through theidentification of suitable combinations ofoptions that – between them – reduce climateimpacts over the range of impact uncertainty,expressing the effectiveness of alternativeportfolios in quantitative terms.• This provides a way of managing uncertaintythat the analysis of individual adaptationoptions does not allow. It can also assessbenefits in economic or physical terms,allowing application in market and non-marketsectors.• The potential disadvantages are that it isresource intensive, requires a high degree ofexpert knowledge, and relies on theavailability of quantitative data. The approachalso requires the use of probabilities, whichcan prove challenging for the application toclimate change. The technique is obviouslynot relevant when one option addresses thefull range of uncertainty in climate impacts.• Previous applications of PA for adaptationhave been reviewed and a number ofadaptation case studies are summarisedwhich provide information on practicalapplications.• The review and case studies provide usefulinformation on the types of adaptationproblem types where PA might beappropriate, as well as data needs, resourcerequirements and good practice lessons.• PA is a key tool for helping to identify andanalyse alternative portfolios of adaptationoptions. It has a clear application in caseswhere adaptation actions are likely to becomplementary in reducing climate risks.