Global Climate Change and the Funding of Adaptation

Mitigation and adaptation are the most important strategies in combating global climate change. It is expected that in a post Kyoto world industrialized countries have to engage in greenhouse gas abatement, and to support developing countries in adapting to climate change. Within the framework of a non-cooperative Nash game we analyze, whether funding adaptation is incentive compatible in the sense that it stipulates mitigation. In particular it is the aim of this paper to discuss: (1) How does foreign funding of adaptation affect mitigation and regional welfare? (2) Under which conditions is it economically rational to fund adaptation in developing regions? We find that, if strict complementarity between adaptation and mitigation exists, funding adaptation increases both global mitigation and the donors' welfare, but negatively affects the recipients' welfare. The later only benefit, if maladaptation or adaptation, which is neutral to mitigation, is funded, which, however, makes the donors worse off.Climate change; mitigation and adaptation; funding of private goods

Global Climate Change and the Funding of Adaptation

Mitigation and adaptation are the most important strategies in combating global climate change. It is expected that in a post Kyoto world industrialized countries have to engage in greenhouse gas abatement, and to support developing countries in adapting to climate change. Within the framework of a non-cooperative Nash game we analyze, whether funding adaptation is incentive compatible in the sense that it stipulates mitigation. In particular it is the aim of this paper to discuss: (1) How does foreign funding of adaptation affect mitigation and regional welfare? (2) Under which conditions is it economically rational to fund adaptation in developing regions? We find that, if strict complementarity between adaptation and mitigation exists, funding adaptation increases both global mitigation and the donors' welfare, but negatively affects the recipients' welfare. The later only benefit, if maladaptation or adaptation, which is neutral to mitigation, is funded, which, however, makes the donors worse off

On the Inventive Compatibility of Funding Adaptation

Voluntary contributions of the industrialized countries are small compared to the financial resources, the developing countries need for adapting efficiently to global climate change. This leads to the conjecture that under the current climate policy architecture industrialized countries lack incentive for funding adaptation in developing ones. This paper discusses the incentive compatibility of funding adaptation. Focusing on the strategic interaction between mitigation and adaptation in a post Kyoto world it is shown that as long as the industrialized countries' adaptation funding as well as the developing countries' contributions to mitigation are voluntary, industrialized countries have only weak incentive to fund adaptation. Moreover tightening the industrialized countries' mitigation targets has an ambiguous effect on global mitigation if the industrialized countries voluntarily fund adaptation. This confirms the above mentioned conjecture and provides insight relevant for the design of future climate policies, which include adaptation funding as an instrument. </jats:p

To mitigate or to adapt: How to confront global climate change

We analyze the strategic interaction between mitigation and adaptation in a non-cooperative game in which regions are players and mitigation and adaptation are perfect substitutes in protecting against climate impacts. We allow for step by step decision making, with mitigation chosen first and adaptation second, and where the benefits of mitigation accrue only in the future. If marginal costs of adaptation decline with global mitigation, high income regions simultaneously invest in mitigation and adaptation. Low income regions engage in mitigation only.Climate change Mitigation and adaptation Public good with private substitutes