Chapter 10. Uncertainty and ambiguity in environmental economics: conceptual issues

Uncertainty is ubiquitous in environmental economics: the field studies interactions between socio-economic and biogeochemical systems and neither is fully understood. So our grasp of their interactions is necessarily limited. We argue that this pervasive uncertainty is best modeled as ambiguity rather than risk, as a set of situations where multiple prior probability distributions arise naturally and must be considered by the decision maker. We review briefly how this insight can affect our understanding of two iconic issues in environmental economics, climate change and biodiversity loss.