Climate Change Adaptation and the Role of Innovation: A Model of Directed Technological Change

Abstract

Adaptation is considered a key element in the defense against the negative effects of climate change on human societies. In this thesis, I study adaptation to climate change by focusing on the role of innovation. I develop a three-sector general equilibrium model with endogenous directed technological change and an environmental damage function. The three sectors represent polluting, green, and adaptation technologies and agents are free to choose how much research to allocate to each sector. I describe the decentralized equilibrium of the model and analyse which are the incentives shaping agents' choices on adaptation. Finally, I try to understand whether an interior solution in which innovation happens both in adaptation and green technologies is possible in this model.