Political Economy of Climate Change Adaptation

Yasmine Van Der Straten, Enrico Perotti and Frederick (Rick) van der Ploeg

No 18959, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study the evolution of voter support for public adaptation when political preferences are shaped by rising climate risk and economic inequality. Political support for tax-funded intervention to preserve habitable land evolves over time when households differ in age, income and beliefs. Support for public adaptation is initially low, rising as climate risk increases. We show that the political equilibrium experiences a tipping point in response to habitat loss if beliefs are not too dispersed, leading to a shift towards a more active adaptation policy. A steady rise in inequality may induce a second tipping point, but the policy impact depends on the balance between the gap in income and beliefs. Overall, public intervention is undermined by a †tragedy of the horizon†effect as cohorts internalize only partially its long-term benefits for future generations. This prevents public adaptation from converging to the social optimum even when political support is highest.

Keywords: Climate change adaptation; Economic inequality; Tragedy of the horizon; Political tipping points (search for similar items in EconPapers)
JEL-codes: D63 H23 Q54 Q58 (search for similar items in EconPapers)
Date: 2024-04
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