Buying Greenhouse Gas Insurance: International Trade and the Adaptation to Climate Change and Variability

This paper has three messages mainly, which are observed both in a simple theoretical model and its empirical application in a general equilibrium analysis of climate change, international trade and adaptation. First, trade might be viewed as a kind of autonomous adaptation to climate change and variability. In particular, trade can help to reduce direct impacts of global climate change on a region’s welfare, but is itself vulnerable to climate change and variability. Second, the less affected and the richer nations are, the more they can profit mostly from moderating the impacts of global climate change through trade. Finally and third, even without cooperation in the solution of the global climate problem, it is in the self-interest of the industrialized nations to fund strategically adaptation in the developing part of the world.