Can Adaptation and Mitigation be complements?

TitleCan Adaptation and Mitigation be complements?
Publication TypeTyndall Working Paper
SeriesTyndall Centre Working Papers
Tyndall Consortium Institution

Southampton

Secondary TitleTyndall Centre Working Paper 79
Keywordsadaptation and mitigation, complements
AuthorsIngham, A., J. Ma, and A. Ulph
Year of Publication2005
Abstract

It is often claimed that mitigation of greenhouse gases and adaptation to climate change are complementary strategies for dealing with climate change. If all that is meant by this is that it will usually be optimal to use both mitigation and adaptation to combat climate change, and that an increase in the perceived damages from climate change should lead to an increase in both mitigation and adaptation, then economic analysis supports this interpretation. But economic analysis has a more precise definition of complementarity: that reducing the costs of mitigation, say, will lead to more mitigation and hence more adaptation. However it turns out to be quite difficult to reproduce this result in the simple economic models that are used for the analysis of economic policy towards climate change. We show that only in the case where the effects of mitigation on marginal adaptation cost is strong do we get that increasing mitigation costs will reduce both mitigation and adaptation. The interpretation is that lowering the costs of mitigation increases mitigation, which slows climate change and makes adaptation more effective. Here mitigation and adaptation would be complements. We use simple models of a single social planner who can choose the optimal mix of adaptation and mitigation to minimize total social costs. We proceed from a very basic model in which there is only one time period and no uncertainty, so there is a known relationship which shows how mitigation and adaptation reduce the damage costs caused by climate change, and known costs of adaptation and of mitigation. It is straightforward to show that in general the optimal combination of mitigation and adaptation will require the use of both strategies and that increasing damage costs requires an increase in both adaptation and mitigation, but that the two strategies are substitutes in the sense used by economists reducing the cost of mitigation increases the use of mitigation and reduces the use of adaptation. We then extend the simple model to allow for a number of complicating features, including dynamics, multiple decision makers, and uncertainty, but it remains the case that mitigation and adaptation are substitutes. Only when we link the cost of adaptation to the level of mitigation do we find the possibility of complementarity. This paper provides details of models used to support the arguments made in our survey paper, Ingham, Ma and Ulph (2005), How do the costs of adaptation affect optimal mitigation when there is uncertainty, irreversibility and learning.

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