Simon Elgersma
University of Groningen, Netherlands
Dynamic Games and Applications Seminar
Mitigation, Adaptation and Cooperation in Response to Climate Disaster
Feb 20, 2025 11:00 AM — 12:00 PM (Montreal time)
Hybrid seminar at GERAD or Zoom link
We consider the tradeoff between mitigation and adaptation in a transboundary pollution game with an environmental regime shift. Countries can lower their emissions to decrease the likelihood that a regime shift takes place or proactively invest in adaptive capital to reduce the impact of the regime shift. We solve for the social planner outcome and the Markov Perfect Nash Equilibrium (MPNE) and study how the option to adapt affects incentives to mitigate, precautionary behavior and welfare. In the social planner outcome, adaptation complements mitigation and increases welfare, but in the non-cooperative outcome adaptation crowds out mitigation and lowers welfare. Finally, we introduce efficient procedures to numerically calculate MPNE in differential games that cannot be solved analytically.