Adaptation, Mitigation and Innovation: A Comprehensive Approach to Climate Policy

The ultimate question that most interests policy makers is how to reduce the climate change vulnerability of socio-economic systems in the most cost-effective manner. Extended literature has investigated the different dimensions of mitigation strategies, whereas much less can be found on adaptation. Even less can be found on the interactions between adaptation and mitigation. The increasing emphasis on adaptation raises a set of still unanswered questions concerning the design of an optimal mix of mitigation and adaptation measures. This paper presents an Integrated Assessment Model (IAM) that explicitly models the connections between mitigation, climate change impacts and adaptation. Compared to the few existing studies in the field, our framework provides a more detailed characterisation of adaptation processes. Adaptation activities have been distinguished from adaptive capacity building. We also provide an updated quantitative support for the calibration of adaptation costs and benefits. Using this framework, we explore issues such as the optimal timing of mitigation and adaptation, the trade-off between mitigation and adaptation, and the regional distribution of investments and residual damage.