Hostname: page-component-cd9895bd7-q99xh Total loading time: 0 Render date: 2024-12-27T07:44:43.813Z Has data issue: false hasContentIssue false
  • English
  • Français

Adaptation to climate change and economic growth in developing countries

Published online by Cambridge University Press:  25 November 2014

Antony Millner  and
Simon Dietz
Antony Millner
Affiliation:
Grantham Research Institute on Climate Change and the Environment, London School of Economics, Houghton Street, London WC2A 2AE, UK. E-mail: [email protected]
Simon Dietz
Affiliation:
Grantham Research Institute on Climate Change and the Environment; and Department of Geography and Environment, London School of Economics and Political Science, UK. E-mail: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

Developing countries are vulnerable to the adverse effects of climate change, yet there is disagreement about what they should do to protect themselves from anticipated damages. In particular, it is unclear what the optimal balance is between investments in traditional productive capital (which increases output but is vulnerable to climate change), and investments in adaptive capital (which is unproductive in the absence of climate change but ‘climate-proofs’ vulnerable capital). We develop a model of investment in adaptive and productive capital stocks, and show that while it is unlikely that the optimal strategy involves no adaptation, the scale and composition of optimal investments depends on empirical context. Application of our model to sub-Saharan Africa suggests, however, that in most contingencies it will be optimal to grow the adaptive sector more rapidly than the vulnerable sector over the coming decades, although it never exceeds 1 per cent of the economy. Our sensitivity analysis goes well beyond the existing literature in evaluating the robustness of this finding.

Type
Research Article
Information
Environment and Development Economics , Volume 20 , Issue 3 , June 2015 , pp. 380 - 406
Copyright
Copyright © Cambridge University Press 2014 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Acemoglu, D. (2008), Introduction to Modern Economic Growth, Princeton, NJ: Princeton University Press.Google Scholar
Agrawala, S. and Fankhauser, S. (2008) Economic Aspects of Adaptation to Climate Change: Costs, Benefits and Policy Instruments, OECD Publishing.Google Scholar
Agrawala, S., Bosello, F., Carraro, C., de Bruin, K., De Cian, E., Dellink, R., and Lanzi, E. (2010), ‘Plan or react?. Analysis of adaptation costs and benefits using integrated assessment models’, Climate Change Economics 2(3): 175–208.Google Scholar
Anthoff, D. and Tol, R. (2012), ‘Schelling's conjecture on climate and development: a test’, in Hahn, R. and Ulph, A. (eds), Climate Change and Common Sense: Essays in Honor of Tom Schelling, Oxford: Oxford University Press.Google Scholar
Atolia, M. and Buffie, E.F. (2009), ‘Reverse shooting made easy: automating the search for the global nonlinear saddle path’, Computational Economics 34: 273–308.Google Scholar
Boko, M., et al. (2007), ‘Chapter 9: Africa’, in Parry, M., Canziani, O., Palutikof, J., van der Linden, P. and Hanson, C. (eds), Climate Change 2007: Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change, Cambridge: Cambridge University Press.Google Scholar
de Bruin, K., Dellink, R.B., and Tol, R.S.J. (2009), ‘AD-DICE: an implementation of adaptation in the DICE model’. Climatic Change 95 (1–2): 63–81.CrossRefGoogle Scholar
EarthTrends (2009), EarthTrends: Environmental Information, Washington, DC: World Resources Institute.Google Scholar
Eisner, R. and Strotz, R.H. (1963), Determinants of Business Investment, Upper Saddle River, NJ: Prentice-Hall.Google Scholar
Fankhauser, S. (2010), ‘The costs of adaptation’. WIREs Climate Change 1: 1–8.Google Scholar
Fankhauser, S. and Burton, I. (2011), ‘Spending adaptation money wisely’, Climate Policy 11(3): 1037–1049.Google Scholar
IPCC (2007), ‘Summary for policymakers’, in Solomon, S., Qin, D., Manning, M., Chen, Z., Marquis, M., Averyt, K., Tignor, M. and Miller, H. (eds), Climate Change 2007: The Physical Science Basis. Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change, Cambridge and New York: Cambridge University Press.Google Scholar
Judd, K.L. (1998), Numerical Methods in Economics, Cambridge, MA: MIT Press.Google Scholar
Kelly, D.L. and Kolstad, C.D. (1999), ‘Bayesian learning, growth, and pollution’, Journal of Economic Dynamics and Control 23(4): 491–518.Google Scholar
Knutti, R. and Hegerl, G.C. (2008), ‘The equilibrium sensitivity of the Earth's temperature to radiation changes’, Nature Geoscience 1(11): 735–743.Google Scholar
Lomborg, B. (2007), Cool It: The Skeptical Environmentalist's Guide to Global Warming. New York: Knopf.Google Scholar
Lucas, R.E. (1967), ‘Adjustment costs and the theory of supply’, Journal of Political Economy 75(4): 321.Google Scholar
Mendelsohn, R. (2012), ‘Development and climate adaptation’, in Hahn, R. and Ulph, A. (eds), Climate Change and Common Sense: Essays in Honor of Tom Schelling, Oxford: Oxford University Press.Google Scholar
Mendelsohn, R. and Schlesinger, M. (1999), ‘Climate-response functions’, Ambio 28(4): 362–366.Google Scholar
Mendelsohn, R. Dinar, A., and Williams, L. (2006), ‘The distributional impact of climate change on rich and poor countries’, Environment and Development Economics 11(2): 159–178.Google Scholar
Nordhaus, W.D. (2008), A Question of Balance, New Haven, CT: Yale University Press.Google Scholar
Nordhaus, W. (2010), ‘Economic aspects of global warming in a post-Copenhagen environment’, Proceedings of the National Academy of Sciences 107(26): 11721.CrossRefGoogle Scholar
Nordhaus, W. and Boyer, J. (2000), Warming the World: Economic Models of Climate Change, Cambridge, MA: MIT Press.Google Scholar
Rao, A.V., Benson, D.A., Darby, C., Patterson, M.A., Franbcolin, C., Sanders, I., and Huntington, G.T. (2010), ‘Algorithm 902: GPOPS, A MATLAB software for solving multiple-phase optimal control problems using the gauss pseudospectral method’, ACM Transactions on Mathematical Software (TOMS) 37: 22:1–22:39.CrossRefGoogle Scholar
Schelling, T.C. (1992), ‘Some economics of global warming’. American Economic Review 82(1): 1–14.Google Scholar
Smit, B. et al. (2001), ‘Adaptation to climate change in the context of sustainable development and equity’. In McCarthy, J., Canziani, O., Leary, N., Dokken, D. and White, K. (eds), Climate Change 2001: Impacts, Adaptation, and Vulnerability. Contribution of Working Group II to the Third Assessment Report of the Intergovernmental Panel on Climate Change, pp. 877–912. Cambridge and New York: Cambridge University Press, pp. 877–912.Google Scholar
Stern, N.H. (2007), The Economics of Climate Change: the Stern Review. Cambridge: Cambridge University Press.Google Scholar
Tol, R.S.J., Downing, T.E., Kuik, O.J., and Smith, J.B. (2004), ‘Distributional aspects of climate change impacts’, Global Environmental Change Part A 14(3): 259–272.CrossRefGoogle Scholar
UNDP (2007), Human Development Report 2007/8, New York: Palgrave MacMillan.Google Scholar
UNFCCC (2007), Investment and Financial Flows to Address Climate Change, Bonn: UN Framework on Climate Change.Google Scholar
Weitzman, M.L. (1976), ‘On the welfare significance of national product in a dynamic economy’, Quarterly Journal of Economics 90(1): 156–162.Google Scholar
World Bank (2006a), Investment Framework for Clean Energy and Development, Washington, DC: World Bank.Google Scholar
World Bank (2006b), ‘Managing water resources to maximize sustainable growth: a country water resources assistance strategy for Ethiopia’, Technical report, Washington DC: World Bank.Google Scholar
World Bank (2010). The Economics of Adaptation to Climate Change, Washington, DC: World Bank.Google Scholar
Supplementary material: PDF

Millner and Dietz Supplementary Material

Appendix

Download Millner and Dietz Supplementary Material(PDF)
PDF 322.6 KB