Plan or React? Analysis of Adaptation Costs and Benefits Using Integrated Assessment Models

Abstract

This report examines adaptation and mitigation within an integrated framework. Global and regional costs of adaptation are assessed dynamically and the resulting benefits are quantified. This is accomplished by developing a framework to incorporate adaptation as a policy variable within three Integrated Assessment Models (IAMs); the global Dynamic Integrated model of Climate and the Economy (DICE), the Regional Integrated model of Climate and the Economy (RICE), and the World Induced Technical Change Hybrid (WITCH) model. The framework developed here takes into account investments in reactive adaptation and in adaptation "stocks", as well as investments in building adaptive capacity. This report presents the first inter-model comparison of results on adaptation costs using the emerging category of adaptation-IAMs. Results show that least-cost policy response to climate change will need to involve subsantial amounts of mitigation efforts, investments in adaptation stock, reactive adaptation measures and adaptive capacity to limit the remaining damages.

Adaptation to climate change and economic growth in developing countries

“…The initial stock of vulnerable capital K V (0), as well the depreciation rate on K V , was chosen in agreement with the values in the most recent version of the RICE model (discussed in Nordhaus (2010)), as was the time series of population L(t). 7 The depreciation rate on K A was taken from Agrawala et al (2010).…”

Catastrophic Risk, Precautionary Abatement, and Adaptation Transfers

“…The AD-WITCH model used in the present study adopts the adaptation cost curves in Agrawala et al (2010). This Appendix describes the calibration of the regional climate change damage functions, which builds on more recent data.…”

“…Reactive adaptation are actions implemented when or right after climatic impacts effectively occur, for the purpose of dealing with any residual damages that anticipatory adaptation or mitigation has been unable to obviate. Examples of these strategies include change in the use of air conditioning or hospitalization and use of health services (see Agrawala et al 2010, 2011 for more details). We assume that a set of constant elasticity of substitution (CES) production functions aggregates the three different adaptation strategies into an adaptation service nest that reduces the damages caused by global warming as described in Agrawala et al (2010Agrawala et al ( , 2011.…”

“…The theoretical frameworks proposed in those studies justify both complementarity and substitutability between the two strategies, indicating that possible solutions can be found in many different combinations. What can actually be the optimal mix (cost-efficient and/or cost-effective) between mitigation and adaptation has been investigated by means of empirical approaches based on Integrated Assessment Models (IAMs) (Agrawala et al, 2010;de Bruin et al, 2009;Bahn et al, 2010;Bosello et al, 2011). In a non-cooperative setting, mitigation remains negligible because of its public good nature.…”

Is there room for geoengineering in the optimal climate policy mix?

“…Recent IAM models (Bosello et al, 2010;Agrawala et al, 2011) include both reactive and proactive adaptation in the available policy mix. Acknowledging the increased flexibility of considering both strategies, we distinguish between reactive (flow) and proactive (stock) adaptation.…”