Fair Share of GDP to Mitigate Climate Change Costs (according to DICE)

This paper investigates the fair share of GDP required to mitigate climate change costs, using an extended DICE model. A dedicated fund, supplied annually by a fixed fraction of GDP, is introduced to cover abatement and damage costs. Numerical analysis reveals that a funding rate of 2.4% of GDP is sufficient to meet all costs, enabling faster early abatement and reducing total emissions significantly. The proposed approach promotes intergenerational equity by distributing climate-related costs evenly across generations, overcoming the classical DICE model's limitations. We investigate the interplay of the model's discount rate and the required funding rate. For low to moderate discount rates the required funding rate is largely independent of the discount rate, while high discount rate lead to higher funding rates as nominal cost increase.