A global stocktake of the Paris pledges: implications for energy systems and economy

This paper presents a model-based assessment of the United Nations-led round of international climate change negotiations in Paris in December 2015 (COP21). We combine a technology-rich bottom-up energy system model with a top-down economic model that captures economy-wide interactions. We analyse the impact of the Intended Nationally Determined Contributions (INDCs) by the individual countries put forward in the run-up to COP21 on greenhouse gas emissions, energy demand and supply, and the wider economic effects, including the implications for trade flows and employment levels. We also illustrate how the gap between the Paris pledges and a pathway that is likely to restrict global warming to 2°C can be bridged, taking into account both equity and efficiency considerations. Results indicate that energy demand reduction and a decarbonisation of the power sector are important contributors to overall emission reductions up to 2050. Further, the analysis shows that global action to cut emissions is consistent with robust economic growth. Emerging and lowest-income economies will maintain high rates of economic growth. The analysis also provides evidence that the use of smart fiscal policies tailored to each region, i.e. increasing emission auctions and taxes, reducing indirect taxes to consumption and investment, and/or lowering labour taxes, can further increase GDP growth.