Buso M., Stenger A. (2015).

Adaptation to climate change: when is the public-private governance a good solution?, Working Papers – Cahiers du LEF n. 2015/14



The impact of climate change on economic activities is becoming an increasingly impor- tant issue that must be adequately taken into account by private and public stakeholders. In this paper, we study the optimal public and/or private governance necessary to adapt natural resources owned by private agents to the new weather conditions. We compare the private case with two types of public-private governances where the government inter- venes by paying part of the adaptation costs, or through contingent transfers on the basis of verifiable outcomes. We conclude that in most cases, without government intervention, the private agent underinvests. However, public intervention can be excessively costly for the society (public finance distortion). Moreover, comparing the two different public-private governances, we conclude that the best way for the government to intervene strictly depends on the type of adaptation the private agent wants to apply.