From Regret Theory to no-regret decision-making: a new framework for managing low-probability, high-impact climatic events

Abstract

Extreme climate disasters, often characterized as low-probability but high-impact ‘black swan’ events, are becoming increasingly frequent and severe due to global warming. Traditional disaster response strategies, which rely on historical statistical patterns and engineering standards based on return periods, are proving inadequate under these changing conditions. Such methods typically assume a stable climate system and struggle to address the nonlinear, compound, and uncertain nature of modern climate risks. In this context, this review introduces a novel decision-making paradigm grounded in regret theory, a behavioral economics framework that accounts for the emotional cost of choosing options that might lead to unfavorable outcomes when compared to unchosen alternatives. Applying this theory to climate disaster management, we propose the concept of ‘no-regret decision-making’ which prioritizes actions that minimize the likelihood of future regret in the face of deep uncertainty, limited data, and high stakes. In this paper, we systematically review traditional and climate-informed disaster decision-making methods, highlighting the limitations of approaches such as return period analysis, scenario planning, and multi-objective optimization when confronted with unprecedented and compound extreme events. In contrast, the ‘no-regret’ framework reframes decision-making as the proactive identification and management of psychologically and socially unacceptable disaster outcomes, defined as exceeding a ‘regret threshold’. This threshold is not only based on scientific assessments of risk but also considers economic resilience, public expectations, and societal tolerance for disaster losses, rather than seeking to eliminate all possible losses which may be impractical or cost-prohibitive, the goal is to ensure that the impacts of extreme events remain within acceptable, tolerable bounds. A practical case study from Shanghai illustrates how this approach can be applied in a real-world urban setting facing multiple flood risks, including sea-level rise, typhoon surges, extreme rainfall, and riverine overflow. This research developed a range of ‘worst-case’ compound disaster scenarios using climate projections and historical record, and evaluated adaptation options such as floodwalls, tide gates, and upgraded drainage infrastructure. These measures are assessed not only for technical feasibility and cost-effectiveness but also for their potential to reduce psychological regret and maintain social sustainability. The study demonstrates that no-regret planning enables adaptive, forward-looking strategies that do not rely on complete knowledge of probability distributions, and can flexibly evolve with emerging risks and societal changes. The paper concludes that no-regret decision-making offers a viable and psychologically informed alternative to traditional risk management, especially in an era of intensifying climate uncertainty. It emphasizes three core principles: prioritizing the protection of life and critical infrastructure, optimizing the balance between cost and effectiveness, and enabling participatory and flexible adaptation pathways. There are three essential steps for no-regret decision-making, that are scientifically detecting the signal of Black Swan events, setting up the regret threshold in accordance with the public psychological expectation and the socioeconomic development level, and enhancing timely emergency response and long-term transformative disaster reduction mechanism. Future research should focus on refining the theoretical basis of regret thresholds, expanding empirical case studies, improving standards for resilient infrastructure, and integrating artificial intelligence and digital twin technologies into dynamic disaster simulation and decision support. Additionally, robust risk transfer mechanisms such as catastrophe insurance and early-warning systems should be strengthened to enhance social resilience. By shifting the focus from predictive accuracy to adaptive preparedness, the no-regret framework provides a timely and actionable strategy for confronting the escalating challenges of climate-related disasters.