Optimal Adaptation and Mitigation to Climate Change in Small Environmental Economies

47 Pages Posted: 15 Dec 2013

See all articles by Omar Chisari

Omar Chisari

Universidad Argentina de la Empresa (UADE)

Sebastian Galiani

University of Maryland - Department of Economics

Sebastian Miller

Inter-American Development Bank (IDB)

Date Written: October 2013

Abstract

This paper compares the optimal dynamic choices between policies of mitigation and adaptation for three economies: Brazil, Chile and the United States. The focus is on the optimal role of mitigation and adaptation for “environmentally small economies,” i. e. , economies that are witnessing an exogenous increase in emissions to which they are contributing very little. The simulations lead to three main conclusions. First, small economies should concentrate their environmental efforts, if any, on adaptation. This is not a recommendation that such economies indulge in free-riding. Instead, it is based on considerations of cost effectiveness, ceteris paribus. Second, small economies that are unable to spend enough on adaptation may end up spending less on mitigation owing to their impoverishment as a result of negative climate shocks. Third, higher mitigation expenditures may arise not only as a result of greater optimal adaptation expenditures, but also because of increased adaptation to the incentives for mitigation provided by richer countries.

Keywords: Optimal mitigation and adaptation policies, Environmentally small economies

JEL Classification: Q52, Q54

Suggested Citation

Chisari, Omar and Galiani, Sebastian and Miller, Sebastian, Optimal Adaptation and Mitigation to Climate Change in Small Environmental Economies (October 2013). IDB Working Paper No. IDB-WP-417, Available at SSRN: https://ssrn.com/abstract=2367690 or http://dx.doi.org/10.2139/ssrn.2367690

Omar Chisari

Universidad Argentina de la Empresa (UADE) ( email )

1016 Buenos Aires
Argentina

Sebastian Galiani

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

Sebastian Miller

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

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