Climate Change: The Economics of Mitigation and Adaptation

Building on the foundational course Climate Change: Economics, Politics, and Global Governance, which examines why climate action is politically and economically difficult, this course moves from understanding the challenges to exploring how economists design, price, finance, and evaluate responses to climate change. It is an applied, tools-focused deep dive into the economics of mitigation — including carbon pricing, abatement costs, and transition finance — and adaptation — including valuation under deep uncertainty, adaptation finance, insurance, and nature-based solutions. The course concludes by examining the trade-offs and synergies between mitigation and adaptation, particularly in the allocation of climate finance.

Participants are encouraged, but not required, to have completed the earlier foundational course — it provides useful context, though is not mandatory.

08/10
Thu

The Economics of Mitigation vs. Adaptation

Two different economic problems, two different toolkits · 7:00 – 8:00 PM

• Mitigation as a global public good: free-riding and non-excludability
• Adaptation as a predominantly local/private good: self-interested, location-specific benefits
• Why this distinction determines who invests, who pays, and what instruments apply
• Setting the agenda: from global cooperation problems to local planning problems

Learning outcome: Distinguish the economic logic of mitigation from that of adaptation, and explain why each requires a different policy toolkit.

09/10
Fri

Mitigation Economics I: Carbon Pricing & Policy Instruments

Taxing carbon, trading permits, and choosing between them · 7:00 – 8:00 PM

• Carbon tax vs. cap-and-trade: Pigouvian tax vs. Coasean permit trading
• Price vs. quantity instruments under uncertainty (Weitzman)
• Examples: the EU Emissions Trading System (EU ETS) and India's Carbon Credit Trading Scheme (CCTS), 2023

Learning outcome: Apply core carbon-pricing instruments to real policy choices, and evaluate when a price-based or quantity-based instrument is preferable.

15/10
Thu

Mitigation Economics II: Marginal Abatement Costs & Sectoral Pathways

Ranking abatement options, sector by sector · 7:00 – 8:00 PM

• Marginal Abatement Cost (MAC) curves as a tool to rank mitigation options by cost and abatement potential
• Sectoral abatement economics: comparing options across power, transport, industry, and AFOLU
• Cost-effective mitigation vs. real-world implementation: why the cheapest options are not always the most feasible
• Reading and interpreting MAC curves: marginal cost, cumulative abatement potential, and mitigation targets

Learning outcome: Read and apply a marginal abatement cost curve to rank mitigation options by cost and abatement potential across sectors.

16/10
Fri

Mitigation Economics III: Financing the Transition & Just Transition

Who pays for decarbonisation, and at what cost of capital? · 7:00 – 8:00 PM

• LCOE and technology learning curves: why solar and battery costs collapsed
• The cost-of-capital problem: why the same technology costs more to finance in the Global South
• Green and blended finance instruments; stranded-asset risk
• Just transition economics: labour market effects of decarbonisation
• The Carbon Border Adjustment Mechanism (CBAM) as a live trade-and-equity flashpoint

Learning outcome: Evaluate the financing challenges of the energy transition, including the cost-of-capital problem and just-transition trade-offs.

22/10
Thu

Adaptation Economics I: Valuing and Planning Under Deep Uncertainty

Why standard cost-benefit analysis struggles with adaptation · 7:00 – 8:00 PM

• Non-stationarity, non-market valuation, and deep uncertainty as core challenges
• Autonomous vs. planned adaptation; incremental vs. transformational adaptation
• Vulnerability and risk assessment as the economic planning backbone
• Decision-making frameworks for uncertain futures (robust decision-making, real options)

Learning outcome: Apply cost-benefit and risk-based frameworks to adaptation decisions made under deep uncertainty.

23/10
Fri

Adaptation Economics II: Costing Adaptation & the Finance Gap

What adaptation costs, and why the money isn't there · 7:00 – 8:00 PM

• Adaptation costing methodologies and their limitations
• The persistent adaptation finance gap (UNEP Adaptation Gap Report)
• Public vs. private adaptation finance
• Mainstreaming adaptation into development planning vs. treating it as a stand-alone budget line

Learning outcome: Assess adaptation finance mechanisms and the scale of the global adaptation finance gap using real-world data.

29/10
Thu

Adaptation Economics III: Risk Transfer

Insuring against climate risk, and investing in ecosystems as infrastructure · 7:00 – 8:00 PM

• Disaster risk financing: parametric/index-based insurance, catastrophe bonds, contingent credit
• Nature-based solutions evaluated against grey infrastructure on cost-effectiveness
• The co-benefits valuation problem: pricing flood buffering, biodiversity, and livelihoods together

Learning outcome: Assess insurance-based and nature-based adaptation mechanisms using real-world cases.

30/10
Fri

Trade-offs and Synergies: Towards an Integrated Framework

Allocating scarce climate finance across mitigation, adaptation, and loss and damage · 7:00 – 8:00 PM

• The contested allocation question: how should climate finance split between mitigation and adaptation?
• Where the two conflict: large hydropower as mitigation, with real downstream adaptation and social costs
• Where the two are synergistic: agroforestry, wetland restoration, efficient irrigation

Learning outcome: Critically analyse the trade-offs and synergies between mitigation and adaptation in climate finance allocation.