Mitigation, Adaptation and Cooperation in Response to Climate Disaster

Simon Elgersma
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Simon Elgersma: University of Groningen

No 2024008-EEF, Research Report from University of Groningen, FEB Research Institute (FEBRI)

Abstract: Facing possible disaster, countries can mitigate the risk of disaster or invest inadaptation to lower the impact of disaster. Contrary to a cooperative outcome,under non-cooperation the possibility to adapt can affect incentives to mitigate.We model this tradeoff in a transboundary pollution game where countries face anendogenous regime shift. We study a cooperative outcome and a non-cooperativeMarkov Perfect Nash Equilibrium. We find that mitigation efforts are reduced bythe possibility to adapt, but this reduction is larger in a non-cooperative than acooperative outcome. Furthermore, free-riding becomes more intense when eitherthe impact of the disaster or the sensitivity of the hazard rate to the pollution stockincreases. Finally, the gains from cooperation increase heavily when adaptation ispossible.

Date: 2024
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