Global warming poses one of the biggest global environmental threats for current and, to a greater extent, future generations. Greenhouse gas (ghg) emissions increase the temperature and the variability of the climate, causing damage (ipcc 2007). Both ghg mitigation and adaptation to the impacts of climate change are essential for effective and efficient climate policy. From a biophysical perspective the near-term impacts of climate change are already ‘locked in’, irrespective of the stringency of mitigation efforts, thus making adaptation inevitable. Meanwhile, the magnitude and rate of climate change will probably exceed the capacity of many systems and societies to adapt, making mitigation inevitable (ipcc 2007: ch. 18). Though adaptation and mitigation are substitutes, from an economic perspective, implementing both adaptation and mitigation will minimise the total social costs of climate change. This is based on the assumption that while initial levels of both mitigation and adaptation can be achieved at low cost in relation to the avoided climate damage, both sets of responses will face progressively rising marginal costs. Therefore, an optimal climate policy would require a mix of both mitigation and adaptation measures, as opposed to solely one or the other.