AD-DICE: An Implementation of Adaptation in the DICE Mode

35 Pages Posted: 22 May 2007

See all articles by Kelly C. de Bruin

Kelly C. de Bruin

Wageningen University

Rob Dellink

Wageningen UR - Environmental Economics and Natural Resources Group; Organization for Economic Co-Operation and Development (OECD)

Richard S. J. Tol

The Economic and Social Research Institute, Dublin; Institute for Environmental Studies, Free University Amsterdam

Date Written: May 2007

Abstract

Integrated Assessment Models (IAMS) have helped us over the past decade to understand the interactions between the environment and the economy in the context of climate change. Although it has also long been recognized that adaptation is a powerful and necessary tool to combat the adverse effects of climate change, most IAMs have not explicitly included the option of adaptation in combating climate change. This paper adds to the IAM and climate change literature by explicitly including adaptation in an IAM, thereby making the trade-offs between adaptation and mitigation visible. Specifically, a theoretical framework is created and used to implement adaptation as a decision variable into the DICE model. We use our new AD-DICE model to derive the adaptation cost functions implicit in the DICE model. In our set-up, adaptation and mitigation decisions are separable and AD-DICE can mimic DICE when adaptation is optimal. We find that our specification of the adaptation costs is robust with respect to the mitigation policy scenarios. Our numerical results show that adaptation is a powerful option to combat climate change, as it reduces most of the potential costs of climate change in earlier periods, while mitigation does so in later periods.

Keywords: Integrated Assessment Modelling, Adaptation, Climate Change

JEL Classification: Q25, Q28

Suggested Citation

de Bruin, Kelly C. and Dellink, Rob and Tol, Richard S. J., AD-DICE: An Implementation of Adaptation in the DICE Mode (May 2007). FEEM Working Paper No. 51.2007. Available at SSRN: https://ssrn.com/abstract=986969 or http://dx.doi.org/10.2139/ssrn.986969

Kelly C. De Bruin (Contact Author)

Wageningen University ( email )

Hollandseweg 1
6706KN
Netherlands

Rob Dellink

Wageningen UR - Environmental Economics and Natural Resources Group ( email )

P.O. Box 8130
Wageningen, 6700 EW
Netherlands
+31 (0)317 4 82009 (Phone)
+31 (0)317 4 84933 (Fax)

HOME PAGE: http://www.sls.wau.nl/enr/staff/dellink/

Organization for Economic Co-Operation and Development (OECD) ( email )

Paris
France

HOME PAGE: http://www.oecd.org/env/cc/econ

Richard S. J. Tol

The Economic and Social Research Institute, Dublin ( email )

Whitaker Square
Sir John Rogerson's Quay
Dublin 2
United States

HOME PAGE: http://www.esri.ie

Institute for Environmental Studies, Free University Amsterdam ( email )

De Boelelaan 1115
Amsterdam, 1081 HV
Netherlands

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