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Optimal growth with adaptation to climate change

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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 des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - Département des Géosciences - ENS Paris - 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 des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

  • Minh Ha-Duong

    (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 des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

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.

Suggested Citation

  • Patrice Dumas & Minh Ha-Duong, 2013. "Optimal growth with adaptation to climate change," Post-Print halshs-00207621, HAL.
    • Handle: RePEc:hal:journl:halshs-00207621
    DOI: 10.1007/s10584-012-0601-7
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00207621v2
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    Cited by:

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    2. Duan, Hongbo & Zhang, Gupeng & Wang, Shouyang & Fan, Ying, 2019. "Integrated benefit-cost analysis of China's optimal adaptation and targeted mitigation," Ecological Economics, Elsevier, vol. 160(C), pages 76-86.
    3. Kimberley Anh Thomas, 2023. "Compelled to Compete: Rendering Climate Change Vulnerability Investable," Development and Change, International Institute of Social Studies, vol. 54(2), pages 223-250, March.
    4. Heuson, Clemens & Gawel, Erik & Gebhardt, Oliver & Hansjürgens, Bernd & Lehmann, Paul & Meyer, Volker & Schwarze, Reimund, 2012. "Fundamental questions on the economics of climate adaptation: Outlines of a new research programme," UFZ Reports 05/2012, Helmholtz Centre for Environmental Research (UFZ).
    5. Tyler Felgenhauer & Mort Webster, 2014. "Modeling adaptation as a flow and stock decision with mitigation," Climatic Change, Springer, vol. 122(4), pages 665-679, February.

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    Keywords

    Climate change; adaptation; optimal growth; integrated assessment model;
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