Optimal response functions in global pollution problems can be upward-sloping: accounting for adaptation

Abstract

The standard model of global pollution predicts that countries’ optimal emission response functions are downward-sloping: if one country or group of countries raises (reduces) its emissions, the optimal response for other countries is to reduce (raise) their emissions. We add to the standard model the possibility of taking adaptation measures and find that the optimal emission response function can be upward-sloping when adaptation capacities are sufficiently high. We investigate the existence and stability of a certain class of equilibria under alternative configurations of response functions.