This paper discusses the interplay between international trade, regional adaptation to climate change and financial transfers for funding adaptation. It combines insights from a theoretical model of North-to-South transfers with the findings of a calibrated dynamic multi-region multi-sector computable general equilibrium model that takes into account the impacts of climate change and the adaptation to it. Assessing the effects of adaptation funding indicates that funding of adaptation in developing regions can be Pareto-improving. Not only will developing regions, which do not own sufficient resources for adapting optimally, profit from receiving adaptation funding. Terms-of-trade improvements in the high and middle income donor countries can dominate transfer costs and hence lead to a net-welfare gain in almost any developed region exceptNorth America. As such our consideration adds a new argument for financially supporting adaptation in the developing world besides the wellknown ones such as fairness and incentives for participation in a global climate treaty.

Author names: 
Schenker, O.
Stephan, G.
Year: 
2014
Reference: 

Schenker, O., & Stephan, G. (2014). Give and take: How the funding of adaptation to climate change can improve the donor’s terms-of-trade. Ecological Economics, 106, 44–55

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