Optimal growth with adaptation to climate change

Abstract

We find that approximately a quarter of the world's productive capital could be sensitive to climate; therefore, this capital faces the risk of accelerated obsolescence in a world warming by an average of 0.2°C per decade. We examine the question of optimal adaptation to climate change in a vintage capital growth model without uncertainty. Along the optimal pathway, adaptation is proactive with an anticipation period of approximately twenty years. While there is additional investment in this scenario compared with a no-climate-change baseline, the overall cost to adapt is low relative to the potential losses from maladaptation. Over-investment in protection capital allows the economy to be consistently well-adapted to climate; thus, such a policy prevents transient maladaptation costs. Sensitivity analysis with an integrated assessment model suggests that costs could be ten times larger if adaptation only begins after vulnerable sectors are impacted.

Do We Need A Zero Pure Time Preference Or The Risk Of Climate Catastrophes To Justify A 2C Global Warming Target ?

“…3. The shape of the damage curve matters as much as the absolute level of action in the cost-benefit balance of climate policies (Dumas and Ha-Duong, 2008).…”

Compelled to Compete: Rendering Climate Change Vulnerability Investable

“…This parallels the shift between 1972 and 2012 ‘from a notion of growth versus the environment to a notion of growth for the environment’ (Gómez‐Baggethun and Naredo, 2015: 385). Economic rationality likewise postulates that effective adaptation will buffer against economic losses and open new markets for accumulation (Dumas and Ha‐Duong, 2013; New Climate Economy, 2018; OECD, 2013).…”

Macroeconomic Modeling of Managing Hurricane Damage in the Caribbean: The Case of Jamaica

“…The paper (Dumas & Ha-Duong, 2013) takes a unique approach by using temperature-specific capital stocks. The papers (Lecocq & Shalizi, 2007), (de Bruin et al, 2009, (Bosello et al, 2010) and (Millner & Dietz, 2015) have in common that adaptation has decreasing returns to scale and that adaptation capital does not have a productive use, but instead works only to reduce damages.…”