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Optimal Climate Change Adaptation and Mitigation Expenditures in Environmentally Small Economies

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  • Sebastian Galiani
  • Sebastian Miller
  • Omar Chisari

Abstract

We study the optimal role of mitigation and adaptation strategies for environmen- tally small economies, that is, economies that are witnessing an exogenous increase in emissions to which they are contributing very little. Our results lead to three main conclusions. First, small economies should concentrate their environmental efforts, if any, on adaptation. This is a recom- mendation based on cost effectiveness rather than on any idea about these economies indulging in free riding. Second, environmentally small economies that are unable to spend enough on adaptation may end up spending less on mitigation in the long term, owing to their impoverish- ment as a result of negative climate shocks. Third, higher mitigation expenditures may arise not only as a result of greater optimal adaptation expenditures, but also because of increased adaptation to the incentives for mitigation provided by richer countries. For the simulations, we use a calibrated optimal growth model for Brazil, Chile, and the United States.

Suggested Citation

  • Sebastian Galiani & Sebastian Miller & Omar Chisari, 2016. "Optimal Climate Change Adaptation and Mitigation Expenditures in Environmentally Small Economies," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2016), pages 65-94, October.
    • Handle: RePEc:col:000425:015157
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    2. Gary D. Libecap & Richard H. Steckel, 2011. "The Economics of Climate Change: Adaptations Past and Present," NBER Books, National Bureau of Economic Research, Inc, number libe10-1.
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    4. Brian Feld & Sebastian Galiani, 2015. "Climate change in Latin America and the Caribbean: policy options and research priorities," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 24(1), pages 1-39, December.
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    More about this item

    Keywords

    optimal mitigation and adaptation policies; environmentally small economies;

    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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