March 6, 2011

Adaptation, Mitigation and Risk-Taking in Climate Policy

by Heike Auerswald, Kai A. Konrad and Marcel Thum

- In contrast to the existing literature, we explicitly model the decision of risk-averse governments on mitigation and adaptation policies. Furthermore we also consider the interaction of the two strategies. Mitigation efforts of a single country trigger crowding out as other countries will reduce their mitigation efforts. We show that, under fairly mild conditions, a unilateral increase in mitigation efforts of a single country can even increase global emissions. In contrast, a unilateral commitment to large adaptation efforts benefits the single country and may reduce the global risk from climate change at the expense of other countries.

Auerswald, H., K.A. Konrad and M. Thum (2011). "Adaptation, Mitigation and Risk-Taking in Climate Policy." CESifo Working Paper No. 3320, Jan 2011.