A Theory of Adaptation to Climate Change as a Global Public Good

Abstract

Policy discussions of climate change have been primarily concerned about mitigating greenhouse gases. However, when adaptation to climate change is a global public good, an efficient allocation cannot be achieved by the imposition of a carbon tax alone to abate greenhouse gases. This paper proposes an alternative policy framework in which a carbon tax is levied globally while adaptation is supported through the recycling of carbon tax revenue. The optimal level of adaptation aid is discussed. In contrast to a single carbon tax approach, it can address climate inequity issues directly by supporting adaptation programs of vulnerable poor regions. Moreover, this approach provides more incentives for developing countries to participate in global climate negotiations.