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Ratcheting up Paris

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The Paris Agreement is designed to increase climate ambition gradually through a process of ratcheting up. What is the plausible endpoint of this process? We develop a tractable integrated assessment model in which countries interact through a decentralized general equilibrium and negotiate unanimously over a global carbon budget, with all mitigation implemented via a global carbon price. We prove existence and uniqueness of a unanimous international agreement on global emissions, in which carbon pricing revenues are redistributed across countries in proportion to marginal climate damages. In a quantitative application for 154 countries, the resulting equilibrium limits global mean surface temperature change to 1.51◦C, at a carbon price of 320 USD/tCO2. The associated international transfers of carbon pricing revenue are progressive toward lower-income countries and amount to about 0.8% of global GDP annually - an order of magnitude larger than the Paris Agreement’s climate finance target.

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  • Humberto Llavador & John Roemer & Thomas Stoerk, 2025. "Ratcheting up Paris," Economics Working Papers 1935, Department of Economics and Business, Universitat Pompeu Fabra.
    • Handle: RePEc:upf:upfgen:1935
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    1. Derek Lemoine & Catherine Hausman & Jeffrey G. Shrader, 2025. "A Guide to Climate Damages," NBER Working Papers 34348, National Bureau of Economic Research, Inc.
    2. Robert O. Keohane & Michael Oppenheimer, 2016. "Paris: Beyond the Climate Dead End through Pledge and Review?," Politics and Governance, Cogitatio Press, vol. 4(3), pages 142-151.
    3. William R. Cline, 2011. "Carbon Abatement Costs and Climate Change Finance," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 6079, October.
    4. Robert O. Keohane & Michael Oppenheimer, 2016. "Paris: Beyond the Climate Dead End through Pledge and Review?," Politics and Governance, Cogitatio Press, vol. 4(3), pages 142-151.
    5. Grafton, R. Quentin & Kompas, Tom & Long, Ngo Van, 2017. "A brave new world? Kantian–Nashian interaction and the dynamics of global climate change mitigation," European Economic Review, Elsevier, vol. 99(C), pages 31-42.
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    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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