Climate Fairness and Growth: Allocating the Remaining Carbon Budget

Limiting global warming to 1.5 degrees requires that cumulative carbon dioxide emissions remain within a finite remaining carbon budget. How this budget is allocated across countries raises questions of fairness and development. This paper evaluates whether equity-based carbon allocations are compatible with sustained economic growth in emerging and developing economies. We compute country-level fair shares of the remaining carbon budget under the equal-cumulative-per-capita (ECPC) principle. Using data for 162 countries between 1950 and 2023, we then estimate the historical relationship between income and per-capita CO2 emissions across income groups and use these elasticities to simulate cumulative emissions until 2050. Our results show that ECPC implies strongly negative remaining carbon budgets for most advanced economies, while lower-income countries retain positive but constrained allocations. Under historically observed income–emissions elasticities, many developing countries would exceed their fair shares when converging toward advanced-economy income levels. At the aggregate level, unused allocations offset only about 17% of the combined carbon budget shortfall implied by countries exceeding their allocation and the negative fair shares arising from historical responsibilities. In a scenario in which we assume that the technology of advanced economies is transferred to all countries, which would lower emission intensities, we find that some countries such as India, Egypt or Indonesia would now be able to economically develop within their fair budgets. At the aggregate level, however, technology transfer would only increase the carbon budget coverage to approximately 38% and would not fully eliminate the gap.