Paris Climate Agreement passes the cost-benefit test

Area of Science:

• Environmental economics
• Climate change policy
• Integrated assessment modeling

Background:

• The Paris Climate Agreement targets limiting global temperature rise to below 2°C.
• Climate policies involve significant mitigation costs and potential climate damage avoidance.
• Economic analysis is crucial for evaluating climate policy effectiveness.

Purpose of the Study:

• To determine the economic optimality of the Paris Climate Agreement pathway.
• To conduct an inter-temporally optimizing cost-benefit analysis of climate change mitigation.
• To assess the economic implications of temperature rise on economic growth.

Main Methods:

• Utilized the DICE (Dynamic Integrated Climate-Economy) model.
• Incorporated a damage-cost curve reflecting the observed relationship between temperature and economic growth.
• Accounted for uncertainties in climate sensitivity, socioeconomic futures, and mitigation costs.

Main Results:

• The Paris Agreement pathway is economically optimal, irrespective of normative assumptions (inequality aversion, time preferences).
• The optimal temperature is robust, driven by the temperature-dependence of mitigation costs and damages.
• Economic growth is significantly impacted by temperature increases, as modeled by the damage-cost curve.

Conclusions:

• The Paris Climate Agreement represents an economically favorable strategy for the century.
• The study provides a robust cost-benefit analysis supporting the Agreement's economic viability.
• Effective implementation of the Agreement is key to realizing its economic benefits.