October 3, 2011

Implications of a Lowered Damage Trajectory for Mitigation in a Continuous-Time Stochastic Model

by Jon Strand

- This paper provides counterexamples to the idea that mitigation of greenhouse gases causing climate change, and adaptation to climate change, are always and everywhere substitutes. The author considers optimal policy for mitigating greenhouse gas emissions when climate damages follow a geometric Brownian motion process with positive drift, and the trajectory for damages can be down-shifted by adaptive activities, focusing on two main cases: 1) damages are reduced proportionately by adaptation for any given climate impact ("reactive adaptation"); and 2) the growth path for climate damages is down-shifted ("anticipatory adaptation").

Strand, J. (2011). "Implications of a Lowered Damage Trajectory for Mitigation in a Continuous-Time Stochastic Model." Policy Research Working Paper No. WPS 5724, Jul 2011.