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Catastrophic Risk, Precautionary Abatement, and Adaptation Transfers

Author

Listed:
  • Francesco Bosello

    (University of Milan, Fondazione Eni Enrico Mattei (FEEM) and Euro-Mediterranean Center on Climate Change (CMCC))

  • Enrica De Cian

    (Fondazione Eni Enrico Mattei (FEEM) and Euro-Mediterranean Center on Climate Change (CMCC))

  • Licia Ferranna

    (Cà Foscari University of Venice and Fondazione Eni Enrico Mattei (FEEM))

Abstract

This paper contributes to the normative literature on mitigation and adaptation by framing the question of their optimal policy balance in the context of catastrophic climate risk. The analysis uses the WITCH integrated assessment model with a module that models the endogenous risk of experiencing an economic catastrophe if temperature increases above a certain threshold. We find that the risk of a catastrophic outcome would encourage countries to reduce emissions even in the absence of a coordinated global agreement on climate change and to realign the policy balance from adaptation toward more mitigation. Our analysis also shows that adaptation transfers from and strategic unilateral commitments to adaptation in developed countries appear to provide weak incentives for reducing emissions in developing countries. Thus our first conclusion is that precautionary considerations, rather than the ability to reduce smooth damage increases, justify mitigation as a fundamental policy option. Accordingly, adaptation is needed to cope with the non-catastrophic damages that countries would fail to address with mitigation Our second conclusion is that supporting adaptation in developing countries should be considered primarily as a mean for ensuring equity or improving development, and very marginally as a mitigation incentive.

Suggested Citation

  • Francesco Bosello & Enrica De Cian & Licia Ferranna, 2015. "Catastrophic Risk, Precautionary Abatement, and Adaptation Transfers," Working Papers 2014.108, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2014.108
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    References listed on IDEAS

    as
    1. Bosello, Francesco & Eboli, Fabio & Pierfederici, Roberta, 2012. "Assessing the Economic Impacts of Climate Change. An Updated CGE Point of View," Climate Change and Sustainable Development 121700, Fondazione Eni Enrico Mattei (FEEM).
    2. Viscusi, W Kip & Aldy, Joseph E, 2003. "The Value of a Statistical Life: A Critical Review of Market Estimates throughout the World," Journal of Risk and Uncertainty, Springer, vol. 27(1), pages 5-76, August.
    3. Andrea Bigano & Jacqueline M. Hamilton & Richard S.J. Tol, 2005. "The Impact Of Climate Change On Domestic And International Tourism: A Simulation Study," Working Papers FNU-58, Research unit Sustainability and Global Change, Hamburg University, revised Jan 2005.
    4. Shardul Agrawala & Francesco Bosello & Carlo Carraro & Kelly De Bruin & Enrica De Cian & Rob Dellink & Elisa Lanzi, 2011. "Plan Or React? Analysis Of Adaptation Costs And Benefits Using Integrated Assessment Models," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 2(03), pages 175-208.
    5. repec:reg:rpubli:282 is not listed on IDEAS
    6. Francesco Bosello & Fabio Eboli & Roberta Pierfederici, 2012. "Assessing the Economic Impacts of Climate Change," Review of Environment, Energy and Economics - Re3, Fondazione Eni Enrico Mattei, February.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Climate Change; Mitigation; Adaptation; Climate Risk; Integrated Assessment;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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