The Role of Proactive Adaptation in International Climate Change Mitigation Agreements
24 Pages Posted: 30 May 2011
Date Written: May 27, 2011
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 heterogeneous 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 free ride. 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.
JEL Classification: Q54
Suggested Citation: Suggested Citation