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Robust Management of Systemic Risks and Food-Water-Energy-Environmental Security: Two-Stage Strategic-Adaptive GLOBIOM Model

Authors: Tatiana Ermolieva; Petr Havlik; Yuri Ermoliev; Nikolay Khabarov; Michael Obersteiner;

Robust Management of Systemic Risks and Food-Water-Energy-Environmental Security: Two-Stage Strategic-Adaptive GLOBIOM Model

Abstract

Critical imbalances and threshold exceedances can trigger a disruption in a network of interdependent systems. An insignificant-at-first-glance shock can induce systemic risks with cascading catastrophic impacts. Systemic risks challenge traditional risk assessment and management approaches. These risks are shaped by systemic interactions, risk exposures, and decisions of various agents. The paper discusses the need for the two-stage stochastic optimization (STO) approach that enables the design of a robust portfolio of precautionary strategic and operational adaptive decisions that makes the interdependent systems flexible and robust with respect to risks of all kinds. We established a connection between the robust quantile-based non-smooth estimation problem in statistics and the two-stage non-smooth STO problem of robust strategic–adaptive decision-making. The coexistence of complementary strategic and adaptive decisions induces systemic risk aversion in the form of Value-at-Risk (VaR) quantile-based risk constraints. The two-stage robust decision-making is implemented into a large-scale Global Biosphere Management (GLOBIOM) model, showing that robust management of systemic risks can be addressed by solving a system of probabilistic security equations. Selected numerical results emphasize that a robust combination of interdependent strategic and adaptive solutions presents qualitatively new policy recommendations, if compared to a traditional scenario-by-scenario decision-making analysis.

Country
Austria
Keywords

330, Environmental effects of industries and plants, TJ807-830, 650, TD194-195, quantile-based risk constraints, Renewable energy sources, 510, Environmental sciences, systemic risks, two-stage non-smooth stochastic optimization, robust strategic and adaptive decisions, interdependent systems, GE1-350

  • BIP!
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    citations
    This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
    6
    popularity
    This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
    Top 10%
    influence
    This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
    Average
    impulse
    This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
    Top 10%
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citations
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
6
Top 10%
Average
Top 10%
Green
gold