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Adaptation and mitigation in long-term climate policies

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Author Info

  • Brechet, Thierry

    ()
    (Université catholique de Louvain, CORE and Chair Lhoist Berghmans in Environmental Economics and Management, B-1348 Louvain-la-Neuve, Belgium)

  • HRITONENKO, Natali

    ()
    (Department of Mathematics, Prairie View A&M University, Texas, USA)

  • YATSENKO, Yuri

    ()
    (Université catholique de Louvain, CORE and Chair Lhoist Berghmans in Environmental Economics and Management, B-1348 Louvain-la-Neuve, Belgium; School of Business, Houston Baptist University, Texas, USA)

Abstract

The paper analytically explores the optimal policy mix between mitigation and environmental adaptation against climate change at a macroeconomic level. The constructed economic- environmental model is formulated as a social planner problem with the adaptation and abatement investments as separate decision variables. The authors prove the existence of a unique steady state and provide a comparative static analysis of the optimal investment. It leads to essential implications for associated long-term environmental policies. In particular, the dependence of the optimal ratio between abatement and adaptation investments on economic efficiency appears to have an inverted U-shape. Data calibration and numerical simulation are provided to illustrate theoretical outcomes.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2010065.

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Date of creation: 01 Oct 2010
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Handle: RePEc:cor:louvco:2010065

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Postal: Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium)
Phone: 32(10)474321
Fax: +32 10474304
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Web page: http://www.uclouvain.be/core
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Related research

Keywords: environmental adaptation; mitigation; optimal investment; long-term climate policies;

This paper has been announced in the following NEP Reports:

References

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  1. Smulders, J.A. & Gradus, R.H.J.M., 1993. "Pollution abatement and long-term growth," Discussion Paper 1993-73, Tilburg University, Center for Economic Research.
  2. Thomas F. Cosimano, 2003. "Optimal Experimentation and the Perturbation Method," Computing in Economics and Finance 2003 71, Society for Computational Economics.
  3. Larry E. Jones & Rodolfo E. Manuelli, 2000. "Endogenous policy choice: the case of pollution and growth," Staff Report 276, Federal Reserve Bank of Minneapolis.
  4. Kelly C. de Bruin & Rob B. Dellink & Richard S.J. Tol, 2007. "AD-DICE: an implementation of adaptation in the DICE model," Working Papers FNU-126, Research unit Sustainability and Global Change, Hamburg University, revised Feb 2007.
  5. Raouf Boucekkine & Natali Hritonenko & Yuri Yatsenko, . "Optimal Firm Behavior under Environmental Constraints," Working Papers 2008_11, Business School - Economics, University of Glasgow.
  6. Toman, Michael & Withagen, Cees, 1998. "Accumulative Pollution, "Clean Technology," and Policy Design," Discussion Papers dp-98-43, Resources For the Future.
  7. Elbasha, Elamin H. & Roe, Terry L., 1996. "On Endogenous Growth: The Implications of Environmental Externalities," Journal of Environmental Economics and Management, Elsevier, vol. 31(2), pages 240-268, September.
  8. Smulders, J.A., 1995. "Environmental quality and pollution-augmenting technological change in a two-sector endogenous growth model," Open Access publications from Tilburg University urn:nbn:nl:ui:12-153411, Tilburg University.
  9. Smulders, J.A. & Gradus, R.H.J.M., 1993. "The trade-off between environmental care and long-term growth: Pollution in three proto-type growth models," Open Access publications from Tilburg University urn:nbn:nl:ui:12-153405, Tilburg University.
  10. Bovenberg, A Lans & Smulders, Sjak A, 1996. "Transitional Impacts of Environmental Policy in an Endogenous Growth Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 861-93, November.
  11. George Economides & Apostolis Philippopoulos, 2008. "Growth enhancing policy is the means to sustain the environment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 207-219, January.
  12. Zmarak Shalizi & Franck Lecocq, 2010. "To Mitigate or to Adapt: Is that the Question? Observations on an Appropriate Response to the Climate Change Challenge to Development Strategies," World Bank Research Observer, World Bank Group, vol. 25(2), pages 295-321, August.
  13. Wagener, F.O.O., 2004. "Skiba points for small discount rates," CeNDEF Working Papers 04-09, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
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Cited by:
  1. Heuson, Clemens & Gawel, Erik & Gebhardt, Oliver & Hansjürgens, Bernd & Lehmann, Paul & Meyer, Volker & Schwarze, Reimund, 2012. "Ökonomische Grundfragen der Klimaanpassung: Umrisse eines neuen Forschungsprogramms," UFZ Reports 02/2012, Helmholtz Centre for Environmental Research (UFZ).
  2. Hassan Benchekroun & Farnaz Taherkhani, 2014. "Adaptation and the Allocation of Pollution Reduction Costs," Dynamic Games and Applications, Springer, vol. 4(1), pages 32-57, March.
  3. HRITONENKO, Natali & YATSENKO, Yuri, 2011. "Sustainable growth and modernization under environmental hazard and adaptation," CORE Discussion Papers 2011025, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Heuson, Clemens & Gawel, Erik & Gebhardt, Oliver & Hansjürgens, Bernd & Lehmann, Paul & Meyer, Volker & Schwarze, Reimund, 2012. "Fundamental questions on the economics of climate adaptation: Outlines of a new research programme," UFZ Reports 05/2012, Helmholtz Centre for Environmental Research (UFZ).
  5. Hassan Benchekroun & Farnaz Taherkhani, 2013. "Adaptation and the Allocation of Pollution Reduction Costs," Cahiers de recherche 03-2013, Centre interuniversitaire de recherche en économie quantitative, CIREQ.

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