Scandinavian Working Papers in Economics

CERE Working Papers,
CERE - the Center for Environmental and Resource Economics

No 2011:9: The Role of Proactive Adaptation in International Climate Change Mitigation Agreements

Kelly Chloe de Bruin (), Hans-Peter Weikard () and Rob Dellink ()
Additional contact information
Kelly Chloe de Bruin: CERE, Centre for Environmental and Resource Economics, Postal: Dept. of Economics, Umeå University, S-901 87 Umeå Sweden
Hans-Peter Weikard: Environmental Economics and Natural Resources Group, Postal: Wageningen University, , The Netherlands
Rob Dellink: Environmental Economics and Natural Resources Group, Postal: Wageningen University, , The Netherlands

Abstract: This paper investigates the role of proactive adaptation in international mitigation coalition formation. Adaptation is introduced into a three stage cartel game of coalition formation. We analytically derive the optimal level of mitigation and proactive adaptation for the singletons and coalition members. We introduce the AD-STACO model which is constructed based on the STACO model, which is an applied three-stage cartel formation model with 12 heterogenous regions. Simulating all possible coalitions (4084) and checking for internal and external stability, we investigate how different levels of proactive adaptation will affect the payoffs in Grand coalition and the incentives to freeride. We examine which stable coalitions are found with different levels of proactive adaptation and whether regions can gain from overadaptation in the best performing stable coalition. We find that though payoffs increase in the Grand coalition with lower adaptation, incentives to leave increase. Coalition members can increase their payoffs through overadaptation.

Keywords: N/A

JEL-codes: Q54

24 pages, May 27, 2011

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