2015 Marijn Sauer 2124122 Thesis BSc Earth and Economics Supervisor: Cees Withagen 03-07-2015 [ADAPTATION VS. MITIGATION] The undesirable impacts of climate change are more shown every day. The question arises what is the best approach: adaptation, mitigation or a combination. This literature research investigates (1) the pros and cons on mitigation and adaptation, and (2) if it is even possible to use one or the other, or else if a combination is always necessary. After this, (3) the results of the RICE-2011 model will be explained and (4) a reflection on the situation of Europe is made.Main results include that adaptation and mitigation could be better approached separately as they mismatch in time and governing scale, describing uncertainty, and because they are interacting. However, a combination is necessary as a total emission reduction still leads to global warming and only adaptation will lead to an inhabitable planet. The RICE-2011 model calculates a global social cost of carbon of $42.68 per metric ton carbon, and a European one of $4.11. However the result should be interpreted as a guideline, as the outcome is heavily dependent on uncertain parameters. It should be wise for Europe to invest in approaches that not only deal with the undesirable impacts of climate change, but rather creates economic opportunities and enhances the robustness of society. Table of content 1. Introduction and method p. 2 2. Theoretical framework p. 4 Results 3. Adaptation versus mitigation p. 7 3.1 Introduction p. 7 3.2 Explanation of terms p. 7 3.3 Overall pros and cons p. 8 3.3.1 Advantages adaptation p. 8 3.3.2 Disadvantages adaptation p. 9 3.3.3 Advantages mitigation p. 10 3.3.4 Disadvantages mitigation p. 11 3.3 Comparison difficulties p. 13 3.4 Separation or combination? p. 14 4. Mitigation, or no mitigation p. 16 4.1 No mitigation – Fossil fuel consumption p. 16 4.2 Only mitigation p. 18 4.2.1 Needed amount of adaptation p. 19 5. The RICE-2011 model p. 20 6. EU response to climate change p. 22 7. Discussion P. 23 8. Conclusion p. 23 References p. 25 Appendix A: Policy responses p. 30 Appendix B: Adaptation difficulties p. 31 Appendix C: Trade-off adaptation, mitigation, do nothing p. 32 Appendix D: Fossil fuel, year of depletion p. 33 Appendix E: Fossil fuel reserves, consumption, and year of depletion p. 33 Appendix F: Carbon-climate response p. 34 Appendix G: CO2 scenarios p. 35 Appendix H: Optimal adaptation with no mitigation p. 36 Appendix I: The RICE-2011 welfare function and SSC function p. 36 1 1. Introduction and method There are two main approaches to deal with the undesirable effects of climate change: adaptation and mitigation. Climate change mitigation focusses on the cause of global warming with main goal to reduce greenhouse gas (Hereafter GHG) emissions, through land-use and habitat management and the protection of carbon reserves. Adaptation deals with the consequences after carbon dioxide (Hereafter CO2) is emitted into the atmosphere. It is vital in order to avoid unwanted impacts and to maintain or restore ecosystem resilience. (Harrison et al., 2010) The European Union (Hereafter EU) is currently investing billions of euros to gradually reduce the demand for fossil fuels by developing alternative sources and strategies. The Tradable emission system is an example of such strategy. These alterations are not only expensive and not easily agreed on by the European Council, but also the question arises if these alterations yield, in terms of climate change, when the rest of the world is not abating theirs. As Dijkstra, VVD Member of Parliament of the Netherlands stated: “The world is getting warmer, but Europe is paying the price” (Eveleens & van Schaik, 2014). Besides, the European Environmental Agency (Hereafter EEA) declares that before now consequences by global warming are already felt through whole of Europe. Higher average temperatures are measured and while the precipitation levels in northern Europe increase, are precipitation levels decreasing in the already dry southern part of Europe. The icecap of Greenland, the Arctic Ocean and many glaciers in Europe are melting, the snow cover decreases and permafrost is warming. (EEA, 2012) In the past few years the occurrences of extreme weather for example heat waves, floods and drought, have increased significantly with associated damage costs. (EEA,2012). The question arises; what is the best approach in order to address the undesirable impacts of climate change: adaptation, mitigation or a combination? The main question is divided into three sub-questions, each answered in another chapter with the use of a literature research. The approach is multi-disciplinary, using physical geography, geology, chemistry, political science, sociological, and economic insights. The first chapter focusses on comparison in mitigation and adaptation. These two concepts are chosen as the two main approaches to address the undesirable effects of climate change. The underlying assumption is that doing nothing, what can also be a choice, is not favourable as the task of the government is to maximize society welfare (Appendix A and C). The only GHG included in this research is CO2, because CO2 is the largest GHG contributor to global warming. Also, the mitigation forms carbon capture and control, and geo-engineering are excluded in this research for existing techniques are not yet cost-effective or preferred. The chapter begins with an explanation of both terms. Secondly, the chapter identifies and summarizes the overall pros and cons on adaptation and mitigation through earth-economic theories. Finally, the comparison difficulties are set forth. The chapter ends with a literature review on the question if the two approaches would be preferably used together or separated. 2 Through literature research the second chapter investigates if it is even possible to use only mitigation, only adaptation, or that a combination is always necessary. To conclude if mitigation is necessary, or if only adaptation is an option, data from the Carbon Dioxide Information Analysis Centre (CDIAC) and British Petroleum (BP) are used. Own calculations are made with data on fossil fuel consumption from the British Petroleum 2014 report to determine when current discovered fossil fuel reserves are fully depleted. Although important, population growth, economic growth, and technological improvements are not included in these calculations due to great uncertainty. In the same sub-chapter, the geological consequences of burning all fossil fuels are set forth. Henceforth, the chapter continues with literature research to conduct an answer if only mitigation is an option. In this part more attention is paid to adaptation with the 2◦C scenario. This scenario was chosen because of the already inevitable temperature rise, even if strict mitigation efforts were made. The last chapter, chapter 3, is dedicated to the RICE-2011 model coined by William Nordhaus. This model calculates the social cost of carbon, which represents the economic damages associated with an increase of one metric ton of carbon in the atmosphere. In a complete and perfect market, the result of the social cost of carbon should be equal to the carbon tax. A perfect carbon tax is a cost- effective governmental instrument to mitigate. And when the optimal amount of mitigation is known, the amount of adaptation necessary could be investigated afterwards. The RICE model has been chosen as an integrated assessment model (Hereafter IAM), because it is one of the three main integrated assessment models used by the United States Environmental Protection Agency, and because it derives the world into regions, such as the EU. After the RICE- 2011 results are set put with literature research, a conclusion is drawn on the best approach to deal with the undesirable impacts of climate change for the EU. 3 2. Theoretical framework Anthropogenic climate change For the development of this theory the Intergovernmental Panel on Climate Change (IPCC) plays an important role. It is the leading international body for the assessment of climate change since 1988 and has ever since gathered scientific, technical and socio-economic data and information concerning causes and effects of climate change (IPCC). Since the previous century there is growing consensus that substantial climate change is caused by GHG emerged from human activity (Johns et al, 2003). In the fifth assessment (AR5) in 2014 of the IPCC, scientists are more than 95% certain that a major part of global warming is caused by anthropogenic activities. The theory is reinforced by analyses of the ecological consequences of human activity, based either upon simplified climate models, expert opinions, or predictions from general circulation models and statistical tests. Furthermore, projected increasing temperatures differ quite strongly due to a number of matters. For example: uncertainty about the balance of greenhouse warming, sulphate aerosol cooling, and the effect on the ocean. Despite evidence provided by climatologists and other scientists, there still is lack of long term knowledge of the most recent human actions, and therefore certainty about the consequences of anthropogenic pollution up until now remains fragile (Myles et al, 2000). Thus, intensification of quantification of long term effects is needed. Overall, a positive causal relation is scientifically observed between the actions of human and climate change. Important insight for this research is that even though there still is uncertainty about the precise drivers, pressures, states, impacts and responses to climate change, IPCC has agreed upon the fact that adaptation and mitigation measures are essential for protection of future societies (Chmielewski, 2002). Game theory Game theory is the science of strategy, and was pioneered by Princeton mathematician John van Neumann. The discussion of game theory started in 1928, when first mentioned in “Theory of Parlor Games” (Dixit and Nalebuff, 2008).