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Climate Policy and the Optimal Balance between Mitigation, Adaptation and Unavoided Damage

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  • Carlo Carraro

    ()
    (Department of Economics, University Of Venice Cà Foscari)

  • Francesco Bosello

    ()
    (University of Milan, Fondazione Enrico Mattei, and CMCC)

  • Enrica De Cian

    ()
    (University of Venice, Fondazione Enrico Mattei)

Abstract

It has become commonly accepted that a successful climate strategy should compound mitigation and adaptation. The accurate combination between adaptation and mitigation that can best address climate change is still an open question. This paper proposes a framework that integrates mitigation, adaptation, and climate change residual damages into an optimisation model. This set-up is used to provide some insights on the welfare maximising resource allocation between mitigation and adaptation, on their optimal timing, and on their marginal contribution to reducing vulnerability to climate change. The optimal mix between three different adaptation modes (reactive adaptation, anticipatory adaptation, and investment in innovation for adaptation purposes) within the adaptation bundle is also identified. Results suggest that the joint implementation of mitigation and adaptation is welfare improving. Mitigation should start immediately, whereas adaptation somehow later. It is also shown that in a world where the probability of climate-related catastrophic events is small and where decision makers have a high discount rate, adaptation is unambiguously the preferred option. Adaptation needs, both in developed and developing countries, will be massive, especially during the second half of the century. Most of the adaptation burden will be on developing countries. International cooperation is thus required to equally distribute the cost of adaptation.

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Bibliographic Info

Paper provided by Department of Economics, University of Venice "Ca' Foscari" in its series Working Papers with number 2010_09.

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Length: 28
Date of creation: 2010
Date of revision:
Handle: RePEc:ven:wpaper:2010_09

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Keywords: Climate change impacts; mitigation; adaptation; integrated assessment model;

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References

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  1. Valentina Bosetti, Carlo Carraro, Marzio Galeotti, Emanuele Massetti, Massimo Tavoni, 2006. "A World induced Technical Change Hybrid Model," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Special I), pages 13-38.
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Cited by:
  1. Francesco Bosello & Enrica De Cian, 2013. "Climate Change, Sea Level Rise, and Coastal Disasters. A Review of Modeling Practices," Working Papers, Fondazione Eni Enrico Mattei 2013.104, Fondazione Eni Enrico Mattei.
  2. YATSENKO, Yuri & HRITONENKO, Natali & BRECHET, Thierry, 2014. "Modeling of environmental adaptation versus pollution mitigation," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2014006, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. 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, Helmholtz Centre for Environmental Research (UFZ) 05/2012, Helmholtz Centre for Environmental Research (UFZ).
  4. Halkos, George, 2014. "The Economics of Climate Change Policy: Critical review and future policy directions," MPRA Paper 56841, University Library of Munich, Germany.
  5. David I. Stern & Frank Jotzo & Leo Dobes, 2013. "The Economics of Global Climate Change: A Historical Literature Review," CCEP Working Papers, Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University 1307, Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University.
  6. 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, Helmholtz Centre for Environmental Research (UFZ) 02/2012, Helmholtz Centre for Environmental Research (UFZ).
  7. Thierry Bréchet & Natali Hritonenko & Yuri Yatsenko, 2013. "Adaptation and Mitigation in Long-term Climate Policy," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 55(2), pages 217-243, June.
  8. Schenker, Oliver & Stephan, Gunter, 2012. "Terms-of-trade and the funding of adaptation to climate change and variability: An empirical analysis," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 12-056, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  9. Carlo Carraro & Emanuele Massetti, 2010. "Beyond Copenhagen: A Realistic Climate Policy in a Fragmented World," Working Papers, Fondazione Eni Enrico Mattei 2010.136, Fondazione Eni Enrico Mattei.
  10. HRITONENKO, Natali & YATSENKO, Yuri, 2011. "Sustainable growth and modernization under environmental hazard and adaptation," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2011025, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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