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Global economic implications of the Nationally Determined Contributions of the Paris Agreement

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  • Marginson, Sam

Abstract

The Paris Agreement is a major agreement by parties to the United Nations Framework Convention on Climate Change. It aims to limit increases in the average global temperature to 2 degrees Celsius above the pre-industrial average, or 1.5 deg. C if possible. As part of the agreement, countries must periodically commit to greenhouse gas emissions reductions, known as Nationally Determined Contributions (NDCs). Countries will compare the effort required to achieve commitments they are considering with the effort required by other countries to achieve theirs. There are several ways that effort can be compared. There is often a focus on economic metrics and so a key question is, what are the economic consequences of the NDCs? This paper seeks to answer this question using computable general equilibrium (CGE) modelling. GDyn-E is a recursive dynamic CGE model developed to assess the impacts of global climate change agreements. I extend the model in two ways to produce a quantitative assessment of the global economic impacts of the Paris Agreement. Firstly, I disaggregate the electricity sector in a manner like that in GTAP-E-Power, a comparative static CGE model. Secondly, I link the model to the Global Trade Analysis Project's non-CO2 greenhouse gas database. The database read by the model is updated to version 10 of the GTAP database. Key model parameters within the electricity sector are calibrated using observations in the period since 2014. Technological changes in the electricity sector are accounted for via productivity shocks. NDCs submitted to the United Nations are interpreted to develop greenhouse gas emissions trajectories for the regions in the model. Differences between the results with and without emissions reductions are discussed. Finally, I consider the way that impacts on economic metrics vary between countries and how that can be interpreted to reflect the effort that each country is putting in to meeting the goals of the Paris Agreement.

Suggested Citation

  • Marginson, Sam, 2020. "Global economic implications of the Nationally Determined Contributions of the Paris Agreement," Conference papers 333164, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:333164
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