Uncertain Catastrophic Events: Another Source of Environmental Traps ?

Can Askan Mavi
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Can Askan Mavi: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: This paper aims to present another explanation for environmental inequalities, by the presence of catastrophic environmental events. We develop a simple dynamic model in which economy is subject to risk of catastrophic events. We show that implementing only adaptation policy could cause multiple equilibria, which we interpret it as an environmental inequality accross different regions or countries. Contrary to this result, it is shown that mitigation policy could save an economy from multiple equi-libria. As a result, we show that adaptation and mitigation policy represents a trade-off concerning environmental inequalities. Based on this elements, we analyze the optimal policy mix of adaptation and mitigation activities, which could avoid these inequalities and show how optimally the policy mix can be implemented with taking into account the catastrophe probability. Our simulation results show that when economy faces a higher risk, both of policies increases but adaptation investment increases much more relatively to mitigation activity.

Keywords: Mitigation; Adaptation; Inequality; Multiple Equilibria; Occurence Hazard; Abrupt damage (search for similar items in EconPapers)
Date: 2016-02-16
New Economics Papers: this item is included in nep-env
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