An Analysis of Adaptation as a Response to Climate Change
Fondazione Eni Enrico Mattei (FEEM); University of Milan - Department of Economics, Business and Statistics; Centro Euro-Mediterraneo per i Cambiamenti Climatici (CMCC)
Fondazione Eni Enrico Mattei (FEEM); Ca' Foscari University of Venice; CMCC - Euro Mediterranean Centre for Climate Change (Climate Policy Division); IPCC; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Centre for European Policy Studies, Brussels; Green Growth Knowledge Platform; International Center for Climate Governance
Enrica De Cian
Fondazione Eni Enrico Mattei (FEEM); Centro Euro-Mediterraneo per i Cambiamenti Climatici (CMCC)
November 25, 2009
University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 26_09
Climate change is likely to have relevant effects on our future socio-economic systems. It is therefore important to identify how markets and policy jointly react to expected climate change to protect our societies and well-being. This study addresses this issue by carrying out an integrated analysis of both optimal mitigation and adaptation at the global and regional level. Adaptation responses are disentangled into three different modes: reactive adaptation, proactive (or anticipatory) adaptation, and investments in innovation for adaptation purposes. The size, the timing, the relative contribution to total climate-related damage reduction, and the benefit-cost ratios of each of these strategies are assessed for the world as a whole, and for developed and developing countries in both a cooperative and a non-cooperative setting.
The study also takes into account the role of price signals and markets in inducing and diffusing adaptation. This leads to two scenarios: A pessimistic one, in which policy-driven adaptation bears the burden, together with mitigation, of reducing climate damage; and an optimistic one, in which markets also autonomously contribute to reducing some damages by modifying sectoral structure, international trade flows, capital distribution and land allocation. For all scenarios, the costs and benefits of adaptation are assessed using WITCH, an integrated assessment, intertemporal optimization, forward-looking model. Extensive sensitivity analysis with respect to the size of climate damages and of the discount rate has also been carried out.
Number of Pages in PDF File: 62
Keywords: Climate change impacts, mitigation, adaptation, integrated assessment model
JEL Classification: Q54, Q56, Q43
Date posted: November 28, 2009