Portfolio modeling in environmental decision making

Abstract

The number of decisions concerning environmental issues is increasing both due to legislation and public interest. Environmental decisions are typically complex and have sociopolitical, ecological and economic dimensions. Methods of multi-criteria decision analysis (MCDA) can support making such multi-objective decisions and indeed environmental applications of MCDA have attracted considerable interest among both researchers and practitioners.

Standard MCDA methods are appropriate for selecting one action out of few alternatives. However, often in environmental problems the decision objectives are best pursued by selecting a set of actions, i.e. a portfolio. A new subfield of MCDA, portfolio decision analysis (PDA), has emerged for supporting decisions where several actions are chosen.

This thesis analyzes the applicability of PDA in environmental decision making. The current state of environmental decision analysis is presented through a literature review, including a review of the most common PDA software. The thesis identifies the key phases of applying PDA in environmental problems and discusses associated challenges and possible solution approaches. Two examples illustrate the application process. The first example develops a PDA model to support the zoning of bog areas for peat extraction with the objective of minimizing environmental risks to the watercourses around the zoned areas. The second example describes how PDA can support building a sustainable and inexpensive water supply system in an urban area.