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Global Climate Change and the Funding of Adaptation

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  • Seraina Buob
  • Gunter Stephan
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    Abstract

    Mitigation and adaptation are the most important strategies in combating global climate change. It is expected that in a post Kyoto world industrialized countries have to engage in greenhouse gas abatement, and to support developing countries in adapting to climate change. Within the framework of a non-cooperative Nash game we analyze, whether funding adaptation is incentive compatible in the sense that it stipulates mitigation. In particular it is the aim of this paper to discuss: (1) How does foreign funding of adaptation affect mitigation and regional welfare? (2) Under which conditions is it economically rational to fund adaptation in developing regions? We find that, if strict complementarity between adaptation and mitigation exists, funding adaptation increases both global mitigation and the donors' welfare, but negatively affects the recipients' welfare. The later only benefit, if maladaptation or adaptation, which is neutral to mitigation, is funded, which, however, makes the donors worse off.

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    File URL: http://www.vwl.unibe.ch/papers/dp/dp0804.pdf
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    Bibliographic Info

    Paper provided by Universitaet Bern, Departement Volkswirtschaft in its series Diskussionsschriften with number dp0804.

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    Date of creation: Nov 2008
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    Handle: RePEc:ube:dpvwib:dp0804

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    Keywords: Climate change; mitigation and adaptation; funding of private goods;

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    1. Scott Barrett & Robert Stavins, 2003. "Increasing Participation and Compliance in International Climate Change Agreements," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 3(4), pages 349-376, December.
    2. Toman, Michael, 1998. "Research Frontiers in the Economics of Climate Change," Discussion Papers dp-98-32, Resources For the Future.
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