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How 'prediction markets' could improve climate risk policies and investment decisions
Sep 2022, phys.org
"The institutional arrangements under which climate-risk information is currently provided mirrors the incentive problems and conflicts of interest that prevailed in the credit-rating industry prior to the 2007/8 financial crisis."In order to make sense of emissions scenarios and to support planning and decision-making, organizations have a pressing need for this type of forward-looking expert risk information."An outcome of interest — such as average CO2 concentration in the year 2040, for example — is partitioned into intervals. Expert participants compare the results of their own modeling with the prices of these intervals, and purchase or sell claims on these intervals if their model suggests the price is too low or too high.
via Lancaster and Exeter University: Roulston, M. et al. Prediction-market innovations can improve climate-risk forecasts, Nature Climate Change (2022). DOI: 10.1038/s41558-022-01467-6
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