Blog post based on an article published in Environment and Development Economics

Climate and policy experts agree that abatement of greenhouse gases and adaptation are the two main options to tackle climate change. Since the United Nations Conference on Climate Change (UNFCC) in Cancun in 2010, international climate negotiations explicitly address countries’ adaptation efforts. Adaptation is costly, estimated between $70 and $100 billion a year from 2010 to 2050, and its burden falls unevenly across countries. In addition, the relationship between adapting to climate change and reducing pollution is complex and it varies with time and geography. Our study is among the first at considering adaptation efforts in the literature studying self-enforcing international environmental agreements.

In particular, we analyze the following questions: how does a country’s adaptation effort affect its decision to pollute? And, how does this relationship affect a country’s willingness to join an international agreement to reduce emissions?

Using a stylized game theoretic model, we first study how a country’s emissions respond to their own higher adaptation effort and how a country’s emissions respond to emissions by other countries (i.e. carbon leakage). Then, we analyze how cross-country differences in adaptation costs affect these strategic relationships and the incentives to join a coalition.

Our analysis provides several new insights. First, we find that reducing the cross-country disparity in adaptation cost leads to higher global emissions. We also find that the relationship between emissions and adaptation depends on adaptation costs, and an exogenous reduction in adaptation costs can change the nature of this relationship from substitutable to complementary. Third, we show that only some countries induce carbon leakage when cost heterogeneity is large, and an exogenous reduction in cost disparity among countries can eliminate such leakage. Finally, and in contrast to the view that placing efforts towards adaptation will discourage participation in climate coalitions, we show that the presence of adaptation is not necessarily a destabilizing factor for climate cooperation.

Our findings imply that policies directed at reducing the gap in adaptation costs, such as the Cancún adaptation fund, or policies directed at reducing carbon leakage, such as the Clean Development Mechanism, can help reduce the adaptation burden of less developed countries in addition to altering the incentives to create large environmental agreements.

Read the full article here.

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