10.4.2.1 Economic Considerations
From a global optimization perspective, the aim of coping with climate change
is to determine the optimal scope and amount of adaptation and mitigation measures
and thus to minimize the resultant global welfare loss. In this context, the
quantity of adaptation depends on the level of mitigation, but the perceived
level and costs of adaptation influence the level of mitigation. The task is
then to set the share of mitigation and adaptation costs within the overall
costs, which include the residual damage costs (Fankhauser, 1996; Jepma and
Munasinghe, 1998). In the IAMs, which use a cost–benefit framework, the
optimal mitigation and adaptation levels are theoretically resolved by comparing
the marginal costs of further action with the marginal benefits of avoided damage.
Many uncertainties characterize this framework, such as sector- and country-specific
damage functions, and adaptation options and their costs are largely unknown,
especially in developing countries. Assumptions and data behind the mitigation
cost functions differ widely as well, as explained in previous chapters.
Integrated studies do not yet explicitly report adaptation costs and possible
secondary benefits of adaptation strategies. In fact, they take into account
individual market adjustments driven by changes in relative prices and changing
consumption, investment, and production decisions to balance the private marginal
benefits and costs (private adaptation; Callaway et al., 1998). However, most
IAMs do not balance the marginal costs of controlling GHG emissions against
those of adapting explicitly to any level of climate change. Tol and Fankhauser
(1998) give an overview of IAMs and their treatment of adaptation strategies
(Table 10.6). Tol et al. (1998) approximate that about
7%–25% of the estimated global damage costs may be attributed to adaptation
activities.
| Table 10.6: Adaptation in integrated assessment
models |
 |
| Model |
Adaptation |
Source |
|
| DICE |
Not explicitly considered |
Nordhaus (1994b) |
| RICE |
Not explicitly considered |
Nordhaus and Yang (1996)
Nordhaus and Boyer (1999) |
| CONNECTICUT |
Not explicitly considered |
Yohe et al. (1996) |
| SLICE |
Not explicitly considered |
Kolstad (1994) |
| AIM |
Not explicitly considered |
Morita et al. (1997) |
| MERGE 2, 3 |
Not explicitly considered |
Manne (1995) |
| CETA |
Not explicitly considered |
Peck and Teisberg (1992) |
CETA revised
|
|
|
| IMAGE 2.1 |
Land allocation: expansion or contraction and intensification or extensification |
Alcamo (1994) |
| CSERGE(M) |
Not explicitly considered |
Maddison (1995) |
| CSERGE(F) |
Not explicitly considered |
Fankhauser (1995a, b) |
| FUND 1.5 |
Induced adaptation |
Tol (1996) |
| PAGE 95 |
Adaptation as policy variable |
Plambeck and Hope (1996) |
| MARIA |
Not explicitly considered |
Mori and Takahaashi (1997) |
| ICAM 2.0, 2.5 |
Induced adaptation |
Dowlatabadi and Morgan (1995) |
| MiniCAM 2.0 |
Induced adaptation |
Edmonds et al. (1994) |
| PGCAM |
Induced adaptation |
Edmonds et al. (1994) |
| DIAM |
Not explicitly considered |
Grubb et al. (1995) |
| FARM |
Production practices in agriculture and forestry, land, water, labour
and capital allocation |
Darwin et al. (1996)
Darwin (1999) |
|
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