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Paris Climate Agreement passes the cost-benefit test

Author

Listed:
  • Nicole Glanemann

    (Potsdam Institute for Climate Impact Research
    WHU—Otto Beisheim School of Management)

  • Sven N. Willner

    (Potsdam Institute for Climate Impact Research)

  • Anders Levermann

    (Potsdam Institute for Climate Impact Research
    Institute of Physics, Potsdam University
    Columbia University)

Abstract

The Paris Climate Agreement aims to keep temperature rise well below 2 °C. This implies mitigation costs as well as avoided climate damages. Here we show that independent of the normative assumptions of inequality aversion and time preferences, the agreement constitutes the economically optimal policy pathway for the century. To this end we consistently incorporate a damage-cost curve reproducing the observed relation between temperature and economic growth into the integrated assessment model DICE. We thus provide an inter-temporally optimizing cost-benefit analysis of this century’s climate problem. We account for uncertainties regarding the damage curve, climate sensitivity, socioeconomic future, and mitigation costs. The resulting optimal temperature is robust as can be understood from the generic temperature-dependence of the mitigation costs and the level of damages inferred from the observed temperature-growth relationship. Our results show that the politically motivated Paris Climate Agreement also represents the economically favourable pathway, if carried out properly.

Suggested Citation

  • Nicole Glanemann & Sven N. Willner & Anders Levermann, 2020. "Paris Climate Agreement passes the cost-benefit test," Nature Communications, Nature, vol. 11(1), pages 1-11, December.
    • Handle: RePEc:nat:natcom:v:11:y:2020:i:1:d:10.1038_s41467-019-13961-1
    DOI: 10.1038/s41467-019-13961-1
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    Cited by:

    1. Nan Lu & Hanqin Tian & Bojie Fu & Huiqian Yu & Shilong Piao & Shiyin Chen & Ya Li & Xiaoyong Li & Mengyu Wang & Zidong Li & Lu Zhang & Philippe Ciais & Pete Smith, 2022. "Biophysical and economic constraints on China’s natural climate solutions," Nature Climate Change, Nature, vol. 12(9), pages 847-853, September.
    2. David Anthoff & Richard S. J. Tol, 2022. "Testing the Dismal Theorem," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 9(5), pages 885-920.
    3. Desbordes, Rodolphe & Eberhardt, Markus, 2024. "Climate change and economic prosperity: Evidence from a flexible damage function," Journal of Environmental Economics and Management, Elsevier, vol. 125(C).
    4. Schultes, Anselm & Piontek, Franziska & Soergel, Bjoern & Rogelj, Joeri & Baumstark, Lavinia & Kriegler, Elmar & Edenhofer, Ottmar & Luderer, Gunnar, 2020. "Economic damages from on-going climate change imply deeper near-term emission cuts," MPRA Paper 103655, University Library of Munich, Germany.
    5. Shinichiro Fujimori & Volker Krey & Detlef Vuuren & Ken Oshiro & Masahiro Sugiyama & Puttipong Chunark & Bundit Limmeechokchai & Shivika Mittal & Osamu Nishiura & Chan Park & Salony Rajbhandari & Dieg, 2021. "A framework for national scenarios with varying emission reductions," Nature Climate Change, Nature, vol. 11(6), pages 472-480, June.
    6. Coppens, Léo & Venmans, Frank, 2025. "The welfare properties of climate targets," LSE Research Online Documents on Economics 125996, London School of Economics and Political Science, LSE Library.
    7. Larch, Mario & Wanner, Joschka, 2024. "The consequences of non-participation in the Paris Agreement," European Economic Review, Elsevier, vol. 163(C).
    8. Asensio, Antonio Maria & Clematis, Davide & Viviani, Massimo & Carpanese, M. Paola & Presto, Sabrina & Cademartori, Davide & Cabot, Pere L. & Barbucci, Antonio, 2021. "Impregnation of microporous SDC scaffold as stable solid oxide cell BSCF-based air electrode," Energy, Elsevier, vol. 237(C).
    9. Makhloufi, Saida & Khennas, Smail & Bouchaib, Sami & Arab, Amar Hadj, 2022. "Multi-objective cuckoo search algorithm for optimized pathways for 75 % renewable electricity mix by 2050 in Algeria," Renewable Energy, Elsevier, vol. 185(C), pages 1410-1424.
    10. Drudi, Francesco & Moench, Emanuel & Holthausen, Cornelia & Weber, Pierre-François & Ferrucci, Gianluigi & Setzer, Ralph & Adao, Bernardino & Dées, Stéphane & Alogoskoufis, Spyros & Téllez, Mar Delgad, 2021. "Climate change and monetary policy in the euro area," Occasional Paper Series 271, European Central Bank.
    11. Larch, Mario & Wanner, Joschka, 2024. "The consequences of non-participation in the Paris Agreement," Open Access Publications from Kiel Institute for the World Economy 302105, Kiel Institute for the World Economy (IfW Kiel).
    12. Chu, Long & Grafton, R. Quentin & Nguyen, Hai, 2022. "A global analysis of the break-even prices to reduce atmospheric carbon dioxide via forest plantation and avoided deforestation," Forest Policy and Economics, Elsevier, vol. 135(C).
    13. Christian P. Fries & Lennart Quante, 2023. "Intergenerational Equitable Climate Change Mitigation: Negative Effects of Stochastic Interest Rates; Positive Effects of Financing," Papers 2312.07614, arXiv.org, revised May 2024.
    14. Quayson, Emmanuel & Amoah, Jerome & Hama, Shinji & Kondo, Akihiko & Ogino, Chiaki, 2020. "Immobilized lipases for biodiesel production: Current and future greening opportunities," Renewable and Sustainable Energy Reviews, Elsevier, vol. 134(C).
    15. Dr. Christian Lutz & Dr. Marc Ingo Wolter, 2021. "Wege zur Klimaneutralität bis 2045 – Politische Handlungsfelder," GWS Discussion Paper Series 21-4, GWS - Institute of Economic Structures Research.
    16. Richard S.J. Tol, 2020. "Kernel density decomposition with an application to the social cost of carbon," Working Paper Series 0720, Department of Economics, University of Sussex Business School.

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