Optimal growth with adaptation to climate change

Patrice Dumas () and Minh Ha-Duong
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Patrice Dumas: LMD - Laboratoire de Météorologie Dynamique (UMR 8539) - UPMC - Université Pierre et Marie Curie - Paris 6 - INSU - CNRS - Institut national des sciences de l'Univers - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - Département des Géosciences - ENS-PSL - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres, CIRED - centre international de recherche sur l'environnement et le développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique

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Abstract: Many economic sectors, like housing or transportation, are exposed to climate and likely to suffer efficiency losses when climate changes. The global economy is far from dematerialized yet, these sectors represent a significant fraction of the existing capital stock. Using an optimal growth model with perfect knowledge, we examine the balance between these efficiency losses and investment in adaptation measures, which can become sunk costs when climate changes even more. Simulations remind that adaptation should be proactive rather than reactive: protection measures installed today are not designed for today's climate only, but anticipate future warmer conditions over their lifetime. While there is an over-investment compared with a no climate change baseline, the overall cost to adapt is relatively low in front of the potential losses from misadaptation. This allows to stay almost always well adapted to climate.

Keywords: Climate change; adaptation; optimal growth; integrated assessment model (search for similar items in EconPapers)
Date: 2013-04
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00207621v2
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Citations: View citations in EconPapers (4)

Published in Climatic Change, 2013, 117 (4), pp.691-710. ⟨10.1007/s10584-012-0601-7⟩

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Journal Article: Optimal growth with adaptation to climate change (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00207621

DOI: 10.1007/s10584-012-0601-7

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