Adaptation to climate change can support unilateral emission reductions

Klaus Eisenack and Leonhard Kähler

Oxford Economic Papers, 2016, vol. 68, issue 1, 258-278

Abstract: Policy advocates frequently call for unilateral action to promote international climate protection. It is still conventional wisdom that unilateral action does not pay off for individual countries due to free-riding incentives for other countries. Does this conclusion change if damage can be reduced by adaptation measures? This article considers adaptation as an explicit decision variable and frames unilateral action as Stackelberg game with two countries. The sequence of play is determined endogenously. We show that the Stackelberg leader reduces adaptation expenditures and emissions if the follower’s damage function has a specific convexity property where adaptation leads to strategic complements. Then, no country has an incentive to deviate from the sequence of play. Unilateral action in adaptation or in emissions leads to a strict Pareto improvement compared to the non-co-operative Nash solution. There are lower total emissions and less adaptation.

Date: 2016
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