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On The Incentive Compatibility Of Funding Adaptation

Author

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  • SERAINA BUOB

    (Department of Economics and Oeschger Centre of Climate Research, Universität Bern, Schanzeneckstrasse 1, CH3012 Bern, Switzerland;
    Stockholm Environment Institute, Stockholm, Sweden)

  • GUNTER STEPHAN

    () (Department of Economics and Oeschger Centre of Climate Research, Universität Bern, Schanzeneckstrasse 1, CH3012 Bern, Switzerland)

Abstract

Voluntary contributions of the industrialized countries are small compared to the financial resources, the developing countries need for adapting efficiently to global climate change. This leads to the conjecture that under the current climate policy architecture industrialized countries lack incentive for funding adaptation in developing ones. This paper discusses the incentive compatibility of funding adaptation. Focusing on the strategic interaction between mitigation and adaptation in a post Kyoto world it is shown that as long as the industrialized countries' adaptation funding as well as the developing countries' contributions to mitigation are voluntary, industrialized countries have only weak incentive to fund adaptation. Moreover tightening the industrialized countries' mitigation targets has an ambiguous effect on global mitigation if the industrialized countries voluntarily fund adaptation. This confirms the above mentioned conjecture and provides insight relevant for the design of future climate policies, which include adaptation funding as an instrument.

Suggested Citation

  • Seraina Buob & Gunter Stephan, 2013. "On The Incentive Compatibility Of Funding Adaptation," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 4(02), pages 1-18.
  • Handle: RePEc:wsi:ccexxx:v:04:y:2013:i:02:n:s201000781350005x
    DOI: 10.1142/S201000781350005X
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    References listed on IDEAS

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    1. Marrouch, W. & Ray Chaudhuri, A., 2011. "International Environmental Agreements in the Presence of Adaptation," Other publications TiSEM 247443ba-1022-47e0-9900-d, Tilburg University, School of Economics and Management.
    2. Cramton Peter & Stoft Steven, 2010. "Price Is a Better Climate Commitment," The Economists' Voice, De Gruyter, vol. 7(1), pages 1-7, February.
    3. Oliver Schenker & Gunter Stephan, 2012. "International Trade and the Adaptation to Climate Change and Variability," Diskussionsschriften dp1201, Universitaet Bern, Departement Volkswirtschaft.
    4. De Bruin, Kelly C. & Dellink, Rob B. & Tol, Richard S. J., 2009. "International Cooperation on Climate Change Adaptation from an Economic Perspective," Papers WP323, Economic and Social Research Institute (ESRI).
    5. Heike Auerswald & Kai A. Konrad & Marcel Thum, 2018. "Adaptation, mitigation and risk-taking in climate policy," Journal of Economics, Springer, vol. 124(3), pages 269-287, July.
    6. Carlo Carraro & Shardul Agrawala & Francesco Bosello & Enrica De Cian, 2009. "Adaptation, Mitigation and Innovation: A Comprehensive Approach to Climate Policy," Working Papers 2009_25, Department of Economics, University of Venice "Ca' Foscari".
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    Cited by:

    1. Weiler, Florian & Klöck, Carola & Dornan, Matthew, 2018. "Vulnerability, good governance, or donor interests? The allocation of aid for climate change adaptation," World Development, Elsevier, vol. 104(C), pages 65-77.
    2. Wolfgang Peters & Reimund Schwarze & Anna-Katharina Topp, 2017. "Pareto Improvements Induced by Climate Funding in a Strategic Adaptation-Mitigation Framework," World Scientific Book Chapters, in: Anil Markandya & Ibon Galarraga & Dirk Rübbelke (ed.),Climate Finance Theory and Practice, chapter 9, pages 191-212, World Scientific Publishing Co. Pte. Ltd..
    3. Alain Ayong Le Kama & Aude Pommeret, 2017. "Supplementing Domestic Mitigation and Adaptation with Emissions Reduction Abroad to Face Climate Change," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(4), pages 875-891, December.
    4. Hoffmann, Christin, 2019. "Estimating the benefits of adaptation to extreme climate events, focusing on nonmarket damages," Ecological Economics, Elsevier, vol. 164(C), pages 1-1.
    5. Renaud Foucart & Grégoire Garsous, 2018. "Climate Change Mitigation with Technology Spillovers," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 71(2), pages 507-527, October.

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