Mitigation + Adaptation What is the optimal climate change policy mix ?

In dealing with climate change, how much should governments focus their effort on mitigation (emission reduction to prevent climate change) and on adaptation (coping with a changed climate)? Very little research has gone into pinning down which strategy is dynamically optimal under what kind of conditions. This paper contributes to this debate by developing a parsimonious optimal control model that identifies the steady state solution and its determinants , transition dynamics, the role of multiple countries, and the role of the non-linearity of climate change. Calibrated simulation results are provided to characterize the model. The results of this paper indicate that the adoption decision for mitigation and adaptation is determined by two key parameters: a climate change damage elasticity and an adjusted mitigation/adaptation cost ratio. Country heterogeneity in terms of emissions influences the policy choice strongly in favour of adaptation.