Adaptation and Mitigation in Long-Term Climate Policies
Center for Operations Research and Econometrics Discussion Paper No. 2010/65
35 Pages Posted: 10 Apr 2011
Date Written: October 8, 2010
Abstract
The paper analytically explores the optimal policy mix between mitigation and environmental adaptation against climate change at a macroeconomic level. The constructed economic-environmental model is formulated as a social planner problem with the adaptation and abatement investments as separate decision variables. The authors prove the existence of a unique steady state and provide a comparative static analysis of the optimal investment. It leads to essential implications for associated long-term environmental policies. In particular, the dependence of the optimal ratio between abatement and adaptation investments on economic efficiency appears to have an inverted U-shape. Data calibration and numerical simulation are provided to illustrate theoretical outcomes.
Keywords: environmental adaptation, mitigation, optimal investment, long-term climate policies
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