Climate Agreements in a Mitigation-Adaptation Game

We analyze the strategic interaction between mitigation (public good) and adaptation (private good) strategies in a climate agreement. We show that adaptation can lead to larger self-enforcing agreements, associated with higher global mitigation levels and welfare if it causes mitigation levels between different countries to be no longer strategic substitutes but complements. Thus, the fear that adaptation will reduce the incentives to mitigate carbon emissions may be unwarranted. We argue that our results extend to many important public goods. The purchase of private goods may not crowd out the provision of public goods, as this is commonly believed.