Intergenerational Fairness and Climate Change Adaptation Policy

Compared to existing needs adaptation policies are lagging behind significantly. Most environmental economists would argue that adaptation measures such as flood protection have the feature of a local public good, and since benefits accrue to later generations also, the public goods issue is the most plausible reason why incentives are often not sufficient to reach the optimal level of adaptation. Within a stylized overlapping generation model, we show that adaptation is subject to severe intergenerational consistency problems, if the generation`s behavior is characterized by pure self-interest. 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 problem can be solved and offers possibilities for policy intervention