Adaptation, mitigation and risk: An analytic approach

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Abstract

The adaptation vs. mitigation dilemma is considered by analyzing a simple dynamic model of managing a polluting process subject to the risk of abrupt occurrences of harmful events. The occurrence hazard can be mitigated by reducing the polluting emissions, while the occurrence damage can be controlled via investments in adaptation activities. A full dynamic characterization of the optimal mitigation/adaptation processes is presented. The adaptation and mitigation policies interact strongly, and the evolution in time of each is affected by the option to implement the other. The conditions under which adaptation investments should begin promptly, take place after some delay or be avoided altogether are derived in terms of some key model parameters.

Original languageEnglish
Pages (from-to)133-147
Number of pages15
JournalJournal of Economic Dynamics and Control
Volume51
DOIs
StatePublished - 1 Feb 2015

Keywords

  • Abrupt damage
  • Adaptation
  • Mitigation
  • Occurrence hazard
  • Optimal management

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