ABSTRACT
This chapter provides the incentives of regions to cooperate on climate change policies. It describes how adaptation can be made explicit in a model with various regions of the world. The chapter presents the role that discounting plays in cooperation, mitigation and adaptation decisions. It also describes the calibration of the adaptation cost curves. The chapter examines the empirical foundation and calibration of the adaptation cost curves in the AD-RICE model. International cooperation on climate policies serves two objectives: increasing the environmental effectiveness and reducing the associated costs. Though adaptation and mitigation are substitutes, from an economic perspective, implementing both adaptation and mitigation will minimise the total social costs of climate change. Both adaptation and mitigation can be used to limit the final effects of climate change. The alternative assumption of zero time preference moves the balance between the effectiveness of adaptation and mitigation policies in favour of more mitigation.
