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Preparing for catastrophic climate change

Yacov Tsur and Cees Withagen

No 117652, Discussion Papers from Hebrew University of Jerusalem, Department of Agricultural Economics and Management

Abstract: We study optimal adaptation to climate change when the harmful consequences of global warming are associated with stochastic occurrence of abrupt changes. The adaptation policy entails the accumulation of a particular sort of capital that will eliminate or reduce the catastrophic damage of an abrupt climate change when (and if) it occurs. The occurrence date is uncertain. The policy problem involves balancing the tradeoffs between the (certain) investment cost prior to occurrence and the benefit (in reduced damage) that will be realized after the (uncertain) occurrence date. For stationary economies the optimal adaptation capital converges to a steady state. For growing economies the optimal adaptation capital stock approaches the maximal economic level above which further accumulation is ineffective.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 24
Date: 2011
New Economics Papers: this item is included in nep-ene and nep-env
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:huaedp:117652

DOI: 10.22004/ag.econ.117652

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