You have entered the Pathfinder's decision tree for choosing approaches for formal appraisal of options.

Formal appraisal of options are methods that enable a decision maker to choose amongst options, or decide. This section presents the decision tree for choosing which formal decision making methods may be appropriate for a given AS. The AS characteristics relevant for this decision tree are characteristics of the set of available adaptation options and the type of knowledge available on the hazard, impacts and outcomes of options.

As this decision tree is complex, the three most important decision nodes are discussed together at the beginning of these section. These three nodes characterise whether decisions are short-term, long-term or should be postponed. The decision nodes for identifying critical tasks and methods are then described in more detail below.

Table 2.8 is presented in order to illustrate paths through the decision tree with the help of a couple of example AS. The different methods are presented and discussed in more detail in the Toolbox section on Formal decision-making.

Table 2.8: Application of formal decision making methods to examples based on the criteria listed above.

Does the set of options include only short-term/ flexible options?	Can residual impacts be projected?	Are there risks due to current climate variability?	Are the relative costs of options high?	Does the set of options include at least one flexible one?	Indication on salient approach	Example
Yes	-	No			Wait and observe.
Yes	-	Yes	Yes		Expected outcomes (e.g. CBA, CEA, MCA).	Farmer threatened by drought with seasonal forecast information (Patt et al. 2005).
Yes	-	Yes	No		Experiment and observe (e.g. adaptive management).	Marine protected area manager faced with rising sea level (Walter 1997).
No	No	Yes	Yes		Expected outcomes (e.g. CBA, CEA, MCA) in current climate.	European urban areas threatened by intensity river flooding. Options: low regret, e.g. larger diameter drains (Hallegatte et al. 2011).
No	Yes	N/a	N/a	No	One-shot robust decision making.	An urban coastal manager wanting to reduce flood risk while increasing economic activity. Options: sea dike level (Wilby and Dessai 2010).
No	Yes	N/a	N/a	Yes	Multiple-shot appraisal (e.g. adaptation pathways).	An urban coastal manager facing an investment decision wanting to reduce flood risk while increasing economic activity. Options: flood defence, climate-resilient development, retreat (Rosenzweig et al. 2011

Short-term or long-term decisions or delaying decisions

The applicability of formal decision making approaches depends on whether a decision is to
be based on the current or future situation. The following three decision nodes are relevant
for deciding this, as represented in the decision tree:

1. Does the set of options only include short-term ones? A short-term option is one with a short lead time (i.e., time from its implementation until it becoming effective) and a short lifetime (i.e. the period of time in which the option influences outcome.
2. Can residual impacts of options be projected? This requires the availability of credible impact models, which is generally only the case for some sectors.
3. Are risks (and opportunities) present due to current climate extremes and variability? Such risks may be related to extreme events such as storms, floods or heat-waves or to longer-period climate variability such as decade scale El Niño–Southern Oscillation (ENSO).

Adaptation decisions should consider the future situation when long-term options are involved (1) and residual impacts can be projected for these (2). When it is not the case that both of these occur, then deciding based on the current situation is sufficient. Take, for example, a farmer facing drought impacts with a decision on changing crop types to more drought resistant strains. If long-term options are involved (1), but residual impacts cannot be projected (2) due to the unavailability of impact models, then decisions can, similarly, only be based on the current situation. If there are no current risks (3), then the decision can be delayed.

The first decision node to consider concerns the time horizon of the full set of options. If the full set of options contains only short-term options, the next decision node to consider concerns whether risks (and opportunities) are due to current climate extremes and variability. This has an indication on whether decisions can be based on the current situation or should be postponed. If the set of options includes long-term options, then further analysis is necessary because estimating benefits (or damages) of long-term options requires future impact projections.

For example, consider a farmer facing drought impacts with a decision on changing crop types to more drought resistant strains. The options considered are all short-term, as new seeds must be planted each year, and the current seasonal variability is the main concern; she can decide based on the current climate. In contrast, consider the same farmer facing a decision on whether or not to invest in irrigation infrastructure. Here, at least one option is long-term and therefore it is necessary to consider knowledge about the future climate.