Intergenerational Fairness and Climate Change Adaptation Policy: An Economic Analysis

Abstract

Compared to existing needs, climate change adaptation policies are significantly deficient. Since many adaptation measures have the feature of a local public good, and since benefits accrue to later generations mainly, most environmental economists would argue that the public goods issue is the most plausible reason why incentives are often insufficient for achieving the optimal level of adaptation. Within a stylized overlapping generation model, we show that adaptation is subject to severe intergenerational consistency problems, if pure self-interest is a feature of the generation’s behavior. This explains among others why too little is invested into climate change adaptation. We also show that if the distribution of income between generations matters or if generations behave altruistic, this consistency conflict can be solved and offers possibilities for policy intervention.