Innovation under Uncertainty

Innovation under Uncertainty

The Future of Carbon-free Energy Technologies

The Fondazione Eni Enrico Mattei series on Economics, the Environment and Sustainable Development

Edited by Valentina Bosetti and Michela Catenacci

Innovation under Uncertainty presents original research and insights on innovation in carbon-free energy technologies. Valentina Bosetti and Michela Catenacci provide a complete and informative assessment of the current potentials and limits and offer a detailed analysis of what could, or should, be the drivers to support their success and large-scale diffusion. The results provided in this book offer important and concrete insights and recommendations concerning the development and the deployment of more efficient generation technologies, the demand for which will undoubtedly increase alongside the growing concern for environmental issues and global warming.

Chapter 1: Expert Judgment Elicitation Protocols

Michela Catenacci, Valentina Bosetti, Giulia Fiorese and Elena Veredolini

Subjects: economics and finance, economics of innovation, energy economics, environmental economics, environment, climate change, energy economics, environmental economics, innovation and technology, economics of innovation

Extract

While past data analysis can provide extremely valuable information on past dynamics and technology development, it is paramount to recognize the distorting effect of uncertainty on innovating firms’ behaviors and its determining role on current and future innovation processes. In order to account for uncertainty and to fill the lack of empirical or modeling data, the ICARUS project resorted to experts’ elicitations, which have been successfully used to collect information on future trends of technology costs. Expert judgments are the expressions of informed opinion that experts make based on their knowledge and experience with respect to technical problems (Hogarth, 1987; Morgan and Henrion, 1990; Cooke, 1991). Eliciting experts’ judgements means collecting subjective probabilities that a specific event will take place in the future, through specific methods of verbal or written communication. Experts’ judgements are particularly useful and are often required in probabilistic decision-making and in the evaluation of risks. They can fill the lack of information or complement other available data based on models’ predictions, thus providing an additional source of information.