{"id":384,"date":"2021-02-17T11:42:48","date_gmt":"2021-02-17T19:42:48","guid":{"rendered":"http:\/\/malat-coursesite.royalroads.ca\/lrnt521\/?page_id=384"},"modified":"2023-03-05T15:33:09","modified_gmt":"2023-03-05T23:33:09","slug":"unit-4","status":"publish","type":"page","link":"https:\/\/commons.royalroads.ca\/cals504\/schedule\/unit-4\/","title":{"rendered":"Unit 4: Estimation"},"content":{"rendered":"

Overview<\/h2>\n

(Week 4 )<\/strong><\/p>\n

In many cases, an organization\u2019s decision regarding whether or not to pursue a course of action will be based (at least in part) on a financial analysis.\u00a0 As such, the kinds of risks and opportunities identified in Unit 3 require quantification in monetary terms.<\/p>\n

In some cases, this procedure is fairly straightforward.\u00a0 For example, the cost of installing specialized equipment to reduce energy consumption in order to adapt to the risk of rapidly accelerating energy prices (e.g., resulting from aggressive decarbonization policies) can be easily obtained by consulting market prices for the equipment.<\/p>\n

However, quantifying the benefit\u2014the value of reduced risk exposure\u2014is much more complex.\u00a0 Following on the previous example, future energy policies, their timing, and their impact on energy prices are all highly uncertain and are, in turn, largely dependent on climate systems that are, themselves, dominated by non-linearities and unpredictability.\u00a0 Quantifying such values in monetary terms requires the planner to take the uncertainty into consideration.<\/p>\n

In this unit, you\u2019ll learn three basic estimation methods for uncertain costs and benefits:\u00a0 expected value, event (or decision) trees and the loss distribution approach.\u00a0 You\u2019ll apply these methods, along with some basic budgeting procedures, to estimate the costs and benefits associated with a selected adaptation strategy for one<\/em> of the risks or opportunities identified in Unit 3.<\/p>\n

By the end of this unit, you will have identified some provisional estimates of costs and benefits.\u00a0 In later units, you\u2019ll learn more about the limitations of these estimation methods and will have an opportunity to explore alternative means of dealing with deep uncertainty in your financial analysis.<\/p>\n

Activities and Assessment<\/h2>\n