Better predictions, better allocations : Scientific advance and adaptation to climate change

Abstract

Climate science initially aspired to improve understanding of what the future would bring, and thereby produce appropriate public policies and e¤ective international climate agreements. If that hope is dashed, as now seems probable, e¤ective policies for adapting to climate change become critical. Climate science assumes new responsibilities by helping to fos- ter more appropriate adaptation measures, which might include shifting modes or locales of production. This theoretical article focuses on two broader tools: consumption smoothing in response to the risk of future losses, and physical adaptation measures to reduce potential damages. It shows that informative signals on the e¤ects of climate change facilitate better decisions on the use of each tool, thereby increasing social welfare