Optimal Climate Change Adaptation and Mitigation Expenditures in Environmentally Small Economies

Sebastian Galiani, Sebastian Miller and Omar Chisari

Economía Journal, 2016, vol. Volume 17 Number 1, issue Fall 2016, 65-94

Abstract: We study the optimal role of mitigation and adaptation strategies for environmen- tally 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 recom- mendation 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 impoverish- ment 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.

Keywords: optimal mitigation and adaptation policies; environmentally small economies (search for similar items in EconPapers)
JEL-codes: Q52 Q54 (search for similar items in EconPapers)
Date: 2016
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Working Paper: Optimal climate change adaptation and mitigation expenditures in environmentally small economies (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:col:000425:015157

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