EIB Working Papers 2012/03: Choosing the optimal climate change policy in the presence of catastrophic risk

This paper contributes to the normative literature on mitigation and adaptation by analyzing their optimal policy balance in the context of climate catastrophic risk. The investigation enriches an integrated assessment model introducing the endogenous link between the probability of experiencing a climate-change related catastrophic event, the temperature increase caused by GHG emissions, and ultimately abatement choices. Results indicate that the presence of catastrophic risk induces substantial mitigation effort even in a non-cooperative setting, where usually global cooperation on climate, and accordingly substantive emission reductions, do not succeed.