Advertisement

Journal of Economics

, Volume 124, Issue 3, pp 269–287 | Cite as

Adaptation, mitigation and risk-taking in climate policy

  • Heike Auerswald
  • Kai A. Konrad
  • Marcel ThumEmail author
Article
  • 259 Downloads

Abstract

The future consequences of climate change are highly uncertain and estimates of economic damages differ widely. Governments try to cope with these risks by investing in mitigation and adaptation measures. In contrast to most of the existing literature, we explicitly model the decision of risk averse governments on mitigation and adaptation policies. We also consider the interaction of the two strategies in presence of uncertainty. Mitigation efforts of a single country trigger crowding out as other countries will reduce their mitigation efforts. This may even lead to lower mitigation on the global scale. In contrast, a unilateral commitment to large adaptation efforts benefits the single country and can reduce the global risk from climate change at the expense of other countries.

Keywords

Climate change Adaptation Mitigation Risk-taking 

JEL classification

H41 H87 Q54 Q58 

Notes

Acknowledgements

We thank Kjell Erik Lommerud, Alf Erling Risa, Sigve Tjøtta, Gaute Torsvik and Kjell Vaage an two anonymous reviewers for very helpful comments and suggestions. This research is funded by the German Federal Ministry of Education and Research (BMBF) within the funding priority ’Economics of Climate Change’ (Grant no. 01LA1106A).

References

  1. Aldy JE (2010) Designing climate mitigation policy. J Econ Lit 48(4):903–934CrossRefGoogle Scholar
  2. Bergstrom T, Blume L, Varian H (1986) On the private provision of public goods. J Public Econ 29(1):25–49CrossRefGoogle Scholar
  3. Bosello F, Chen C (2010) Adapting and mitigating to climate change: balancing the choice under uncertainty, Fondazione Eni Enrico Mattei—Sustainable developement series 159—Technical reportGoogle Scholar
  4. Bosetti V, Cian ED (2013) A good opening: the key to make the most of unilateral climate action. Environ Resource Econ 56:255–276CrossRefGoogle Scholar
  5. Bramoullé Y, Treich N (2009) Can uncertainty alleviate the commons problem? J Eur Econ Assoc 7(5):1042–1067CrossRefGoogle Scholar
  6. Buchholz W, Nett L, Peters W (1998) The strategic advantage of being less skilled. Econ Lett 60(1):35–39CrossRefGoogle Scholar
  7. Ebert U, Welsch H (2012) Adaptation and mitigation in global pollution problems: economic impacts of productivity, sensitivity, and adaptive capacity. Environ Resource Econ 52:49–64CrossRefGoogle Scholar
  8. Fankhauser S, Smith JB, Tol RSJ (1999) Weathering climate change: some simple rules to guide adaptation decisions. Ecol Econ 30(1):67–78CrossRefGoogle Scholar
  9. Farnham M, Kennedy P (2015) Adapting to climate change: equilibrium welfare implications for large and small economies. Environ Resource Econ 61:345–363CrossRefGoogle Scholar
  10. Hasson R, Löfgren A, Visser M (2010) Climate change in a public goods game: investment decision in mitigation versus adaptation. Ecol Econ 70(2):331–338CrossRefGoogle Scholar
  11. Heuson C (2015) Investment and adaptation as commitment devices in climate politics. Environ Resource Econ 62(4):769–790CrossRefGoogle Scholar
  12. Hoel M (1991) Global environmental problems: the effects of unilateral actions taken by one country. J Environ Econ Manag 20(1):55–70CrossRefGoogle Scholar
  13. Ihori T (1996) International public goods and contribution productivity differentials. J Public Econ 61(1):139–154CrossRefGoogle Scholar
  14. Ingham A, Ma J, Ulph AM (2007) Climate change, mitigation and adaptation with uncertainty and learning. Energy Policy 35(11):5354–5369CrossRefGoogle Scholar
  15. Ingham A, Ma J, Ulph AM (2013) Can adaptation and mitigation be complements? Clim Change 120(1–2):39–53CrossRefGoogle Scholar
  16. Intergovernmental Panel on Climate Change (2013) Climate change 2013—the physical science basis: contribution of working group I to the fifth assessment report of the IPCC. Cambridge University Press, CambridgeGoogle Scholar
  17. Kane S, Shogren JF (2000) Linking adaptation and mitigation in climate change policy. Clim Change 45(1):75–102CrossRefGoogle Scholar
  18. Konrad KA (1994) The strategic advantage of being poor: private and public provision of public goods. Economica 61(241):79–92CrossRefGoogle Scholar
  19. Lohse T, Robledo JR, Schmidt U (2012) Self-insurance and self-protection as public goods. J Risk Insur 79(1):57–76CrossRefGoogle Scholar
  20. Meyer J (1987) Two-moment decision models and expected utility maximization. Am Econ Rev 77(3):421–430Google Scholar
  21. Morath F (2010) Strategic information acquisition and the mitigation of global warming. J Environ Econ Manag 59(2):206–217CrossRefGoogle Scholar
  22. Robledo JR (1999) Strategic risk taking when there is a public good to be provided privately. J Public Econ 71(3):403–414CrossRefGoogle Scholar
  23. Sinn H-W (1989) Economic decisions under uncertainty, 2nd edn. Physica-Verlag, HeidelbergCrossRefGoogle Scholar
  24. Siqueira K (2003) International externalities, strategic interaction, and domestic politics. J Environ Econ Manag 45(3):674–691CrossRefGoogle Scholar
  25. Sturm B, Weimann J (2008) Unilateral emission abatement: an experiment. In: Cherry T, Shogren J, Kroll S (eds) Environmental economics, experimental methods. Routledge, London, pp 157–183Google Scholar
  26. Tol RSJ (2009) The economic effects of climate change. J Econ Perspect 23(2):29–51CrossRefGoogle Scholar
  27. Tol RSJ (2013) Targets for global climate policy: an overview. J Ecn Dyn Control 37(5):911–928CrossRefGoogle Scholar
  28. Tol RSJ (2014) Correction and update: the economic effects of climate change. J Econ Perspect 28(2):221–226CrossRefGoogle Scholar
  29. Tol RSJ, Yohe GW (2007) Infinite uncertainty, forgotten feedbacks, and cost-benefit analysis of climate policy. Clim Change 83(4):429–442CrossRefGoogle Scholar
  30. Tsur Y, Withagen C (2013) Preparing for catastrophic climate change. J Econ 110:225–239CrossRefGoogle Scholar
  31. Vicary S (2009) The voluntary provision of a public good in an international commons. Can J Econ 42(3):984–996CrossRefGoogle Scholar
  32. Zehaie F (2009) The timing and strategic role of self-protection. Environ Resour Econ 44(3):337–350CrossRefGoogle Scholar

Copyright information

© Springer-Verlag GmbH Austria 2017

Authors and Affiliations

  1. 1.Faculty of Business and EconomicsTechnische Universität DresdenDresdenGermany
  2. 2.Max Planck Institute for Tax Law and Public FinanceMunichGermany
  3. 3.ifo Dresden & CESifoDresdenGermany

Personalised recommendations