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Optimal climate change adaptation and mitigation expenditures in environmentally small economies

Author

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  • Chisari, Omar
  • Galiani, Sebastian
  • Miller, Sebastian
Abstract
We study the optimal role of mitigation and adaptation strategies for environmentally small economies, that is, economies that are witnessing an exogenous increase in emissions to which they are contributing very little. Our results lead to three main conclusions. First, small economies should concentrate their environmental efforts, if any, on adaptation. This is a recommendation based on cost effectiveness rather than on any idea about these economies indulging in free riding. Second, environmentally small economies that are unable to spend enough on adaptation may end up spending less on mitigation in the long term, owing to their impoverishment as a result of negative climate shocks. Third, higher mitigation expenditures may arise not only as a result of greater optimal adaptation expenditures, but also because of increased adaptation to the incentives for mitigation provided by richer countries. For the simulations, we use a calibrated optimal growth model for Brazil, Chile, and the United States. JEL classifications: Q52, Q54

Suggested Citation

  • Chisari, Omar & Galiani, Sebastian & Miller, Sebastian, 2016. "Optimal climate change adaptation and mitigation expenditures in environmentally small economies," LSE Research Online Documents on Economics 123083, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:123083
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    References listed on IDEAS

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    1. Shiell, Leslie & Lyssenko, Nikita, 2008. "Computing business-as-usual with a representative agent and a pollution externality," Journal of Economic Dynamics and Control, Elsevier, vol. 32(5), pages 1543-1568, May.
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    3. Brian Feld & Sebastian Galiani, 2015. "Climate change in Latin America and the Caribbean: policy options and research priorities," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 24(1), pages 1-39, December.
    4. Gary D. Libecap & Richard H. Steckel, 2011. "The Economics of Climate Change: Adaptations Past and Present," NBER Books, National Bureau of Economic Research, Inc, number libe10-1.
    5. Stokey, Nancy L, 1998. "Are There Limits to Growth?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 1-31, February.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    optimal mitigation and adaptation policies; environmentally small economies;

    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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