Mitigation versus compensation in global warming policy

Policy discussions on global warming are focused on mitigation and adaptation. Here the role of ex post compensation as a substitute for ex ante mitigation is considered. In a simple 2-period model the salient features of the global warming problem suggest mitigation is difficult to motivate. A key problem is that damages are very hard to identify even after the fact. The roles of endogenous private savings and a compensation fund as an alternative to ex ante mitigation are explored.