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Investment and adaptation as commitment devices in climate policy deteriorate mitigation

  • Peters, Wolfgang
  • Heuson, Clemens
  • Schwarze, Reimund
  • Topp, Anna-Katharina

The strategy of adaptation to climate change has become a central topic within the UNFCCC negotiations in recent years. On the national level, adaptation plans are elaborated, and on the international level, the need for funding adaptation in developing countries is discussed. This tendency shows that adaptation is likely to be advanced relative to mitigation on the political agenda. Therefore, we analyze the economic consequences of the timing of mitigation and adaptation in a game-theoretic framework regarding as well the importance of technological investments for mitigation. Due to strategic behavior, the activity in mitigation deteriorates when adaptation is advanced. As a consequence, the resulting subgame-perfect equilibrium yields higher total costs. We demonstrate that this result is even reinforced when technological investments are regarded, i.e. the negative effects of advancing adaptation relative to the opposite timing are amplified.

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Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 79719.

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Date of creation: 2013
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Handle: RePEc:zbw:vfsc13:79719
Contact details of provider: Web page: http://www.socialpolitik.org/
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  1. Buob, Seraina & Stephan, Gunter, 2011. "To mitigate or to adapt: How to confront global climate change," European Journal of Political Economy, Elsevier, vol. 27(1), pages 1-16, March.
  2. Bohringer, Christoph & Vogt, Carsten, 2004. "The dismantling of a breakthrough: the Kyoto Protocol as symbolic policy," European Journal of Political Economy, Elsevier, vol. 20(3), pages 597-617, September.
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  4. Wolfgang Buchholz & Kai Konrad, 1994. "Global environmental problems and the strategic choice of technology," Journal of Economics, Springer, vol. 60(3), pages 299-321, October.
  5. Udo Ebert & Heinz Welsch, 2012. "Adaptation and Mitigation in Global Pollution Problems: Economic Impacts of Productivity, Sensitivity, and Adaptive Capacity," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 52(1), pages 49-64, May.
  6. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, June.
  7. Heike Auerswald & Kai A. Konrad & Marcel Thum, 2011. "Adaptation, Mitigation and Risk-Taking in Climate Policy," CESifo Working Paper Series 3320, CESifo Group Munich.
  8. Ficre Zehaie, 2009. "The Timing and Strategic Role of Self-Protection," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 44(3), pages 337-350, November.
  9. John Stranlund, 1996. "On the strategic potential of technological aid in international environmental relations," Journal of Economics, Springer, vol. 64(1), pages 1-22, February.
  10. Christoph Böhringer & Carsten Vogt, 2003. "Economic and environmental impacts of the Kyoto Protocol," Canadian Journal of Economics, Canadian Economics Association, vol. 36(2), pages 475-496, May.
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