Modeling adaptation as a flow and stock decision with mitigation

An effective policy response to climate change will include, among other things, investments in lowering greenhouse gas emissions (mitigation), as well as short-term temporary (flow) and long-lived capital-intensive (stock) adaptation to climate change. A critical near-term question is how investments in reducing climate damages should be allocated across these elements of a climate policy portfolio, especially in the face of uncertainty in both future climate damages and also the effectiveness of yet-untested adaptation efforts. We build on recent efforts in DICE-based integrated assessment modeling approaches that include two types of adaptation—short-lived flow spending and long-lived depreciable adaptation stock investments—along with mitigation, and we identify and explore the uncertainties that impact the relative proportions of policies within a response portfolio. We demonstrate that the relative ratio of flow adaptation, stock adaptation, and mitigation depend critically on interactions among: 1) the relative effectiveness in the baseline of stock versus flow adaptation, 2) the degree of substitutability between stock and flow adaptation types, and 3) whether there exist physical limits on the amount of damages that can be reduced by flow-type adaptation investments. The results indicate where more empirical research on adaptation could focus to best inform near-term policy decisions, and provide a first step towards considering near-term policies that are flexible in the face of uncertainty.