Investing to Mitigate and Adapt to Climate Change: A Framework Model

Bonen, Anthony; Loungani, Prakash; Semmler, Willi; Koch, Sebastian

doi:10.5089/9781475523690.001

Cited by 16 publications

(18 citation statements)

References 33 publications

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“…Many recent publications [29][30][31][32][33][34][35][36][37][38][42][43][44][45][46] explore various economic, political, financial, welfare, and regional aspects of strategic interplay between mitigation and adaptation. The majority of related papers tend to favor mitigation versus adaptation for various relevant (and not-so-relevant) reasons.…”

Section: Discussionmentioning

confidence: 99%

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Games with Adaptation and Mitigation

Hritonenko

Yatsenko

2020

Games

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We formulate and study a nonlinear game of n symmetric countries that produce, pollute, and spend part of their revenue on pollution mitigation and environmental adaptation. The optimal emission, adaptation, and mitigation investments are analyzed in both Nash equilibrium and cooperative cases. Modeling assumptions and outcomes are compared to other publications in this fast-developing area of environmental economics. In particular, our analysis implies that: (a) mitigation is more effective than adaptation in a crowded multi-country world; (b) mitigation increases the effectiveness of adaptation; (c) the optimal ratio between mitigation and adaptation investments in the competitive case is larger for more productive countries and is smaller when more countries are involved in the game.

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Section: Discussionmentioning

confidence: 99%

“…Different modeling assumptions about payoff functions, pollution disutility/damage, and mitigation and adaptation effectiveness are used in [29][30][31][32][33][34][35][36][37][38] to explore economic, agricultural, welfare, political, and regional aspects of strategic interactions among pollution, mitigation, and adaptation.…”

Section: Introductionmentioning

confidence: 99%

Games with Adaptation and Mitigation

Hritonenko

Yatsenko

2020

Games

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“…Yet, in the long run there are likely to be also welfare gains. Nordhaus (1992Nordhaus ( , 2014, and Bonen et al (2016), Orlov et al (2018) provide an explicit treatment of both, the mitigation and adaptation costs. 2 Although an equilibrium between long-run cost and benefits can be achieved, regulation standards need to change across time.…”

Section: Introductionmentioning

confidence: 99%

The Effects of Political Short-Termism on Transitions Induced by Pollution Regulations

Bartolomeo

Saltari

Semmler

2020

Dynamic Modeling and Econometrics in Economics and Finance

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We study the dynamic problem of pollution control enacted by some policy of regulation and mitigation. The dynamics of the transition from one level of regulation and mitigation to another usually involves inter-temporal trade-offs. We focus on how different policymaker's time horizons affect these trade-offs. We refer to shorter lengths in policymaker's time horizons as political short-termism or inattention, which is associated with political economy or information constraints. Formally, inattention is modeled by using Nonlinear Model Predictive Control. Therefore, it is a dynamic concept: our policymakers solve an inter-temporal decision problem with finite horizon that involves the repetitive solution of an optimal control problem at each sampling instant in a receding horizon fashion. We find that political shorttermism substantially affects the transition dynamics. It leads to quicker, but costlier, transitions. It also leads to an under-evaluation of the environmental costs that may accelerate climate change. * The authors are grateful for comments from Bas van Aarle, Marco Di Pietro, Francesco Forte, Behnaz Minooei Fard, and Joseph Plasmans. They also authors acknowledge financial support by Sapienza University of Rome. An earlier version of this paper has been circulated under the title "Inattention, and pollution regulation policies." 1 See Spengler and Sexton (1983) and Gallegati et al. (2017) for the nexus of economic growth, C02 emission and global temperature rise. For the nexus of CO2 emission, climate disasters and adaptation policies, see Mittnik et al. (2018). 2 Orlov et al. (2018 show that indeed the agents in the short run, the current generation, might face some welfare losses, as compared to business-as usual, but in the long run, for future generations, there can also be some gains, since increases in temperature and damages are avoided.

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“…In doing so we build on a macro model developed by Bonen et al (2016), Maurer et al (2018) and Semmler et al (2018) which allows for studying the issue of large climaterelated disaster shocks and climate change policies. Our model explicitly solves for fiscal and financial resources to deal with trade-offs of mitigation and adaptation p olicies.…”

Section: Introductionmentioning

confidence: 99%

Climate Disaster Risks – Empirics and a Multi-Phase Dynamic Model

Mittnik¹,

Semmler²,

Haider³

2019

IMF Working Papers

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Recent research in financial economics has shown that rare large disasters have the potential to disrupt financial sectors via the destruction of capital stocks and jumps in risk premia. These disruptions often entail negative feedback e?ects on the macroecon-omy. Research on disaster risks has also actively been pursued in the macroeconomic models of climate change. Our paper uses insights from the former work to study disaster risks in the macroeconomics of climate change and to spell out policy needs. Empirically the link between carbon dioxide emission and the frequency of climate re-lated disaster is investigated using cross-sectional and panel data. The modeling part then uses a multi-phase dynamic macro model to explore this causal nexus and the e?ects of rare large disasters resulting in capital losses and rising risk premia. Our proposed multi-phase dynamic model, incorporating climate-related disaster shocks and their aftermath as one phase, is suitable for studying mitigation and adaptation policies.

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Investing to Mitigate and Adapt to Climate Change: A Framework Model

Cited by 16 publications

References 33 publications

Games with Adaptation and Mitigation

Games with Adaptation and Mitigation

The Effects of Political Short-Termism on Transitions Induced by Pollution Regulations

Climate Disaster Risks – Empirics and a Multi-Phase Dynamic Model

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