Significant uncertainties exist on the climate side of the analysis. The key issue is how quantitative methods of economic analysis and risk management can help to make the best
possible decision given incomplete information. In other words, how can modern tools for economic analysis help policymakers process available information and make a decision that balances benefits and risks. The integrated assessment framework, described in this paper, provides a convenient analytical tool.

Our society has sophisticated techniques for analyzing risks that can be modeled and quantified. But other threats—often the most serious ones—do not fit the paradigm. These threats involve what the economist Frank Knight classified as “uncertainty” (where the likelihood of the peril is nonquantifiable) as opposed to “risk” (where the likelihood is quantifiable).

"Eyes on a Climate Prize: Rewarding Energy Innovation to Achieve Climate Stabilization," explores the use of inducement prizes as a means to develop technology to stabilize
green house gas contributions to global climate change. The author, Jonathan H. Adler, presents the current state of the policy debate concerning greenhouse gases (GHG) and
global climate change. The premise of the paper is that the level of technological innovation necessary to make atmospheric stabilization affordable—and therefore a politically

The economics of innovation typically treats winning a patent as the equivalent of winning a prize, where the reward for getting a patent is the profit the winning innovator1 can extract from the exclusive right to produce a particular item or utilize a particular process. What little there is on this question primarily involves the theoretical benefits and practical problems with having

Meeting the climate policy challenge will require policymakers to expand their policy toolkit. Specifically, the federal government should shift a substantial portion of climate-related research and development funding from grants to prizes. Instead of doling out billions to researchers in the hope they will invent something that will help solve the global warming challenge, the government should offer substantial rewards to those who invent or develop technologies that solve particular climate-related problems.