Net economic benefits of well-below 2°C scenarios and associated uncertainties

Abstract

Climate stabilization pathways reviewed by the Intergovernmental Panel on Climate Change depict the transformation challenges and opportunities of a low carbon world. The scenarios provide information about the transition, including its economic repercussions. However, these calculations do not account for the economic benefits of lowering global temperature; thus, only gross policy costs are reported and discussed. Here, we show how to combine low carbon pathways' mitigation costs with the growing but complex literature quantifying the economic damages of climate change. We apply the framework to the scenarios reviewed in the Special Report on 1.5°C of the Intergovernmental Panel on Climate Change. Under a probabilistic damage function and climate uncertainty, we show that Paris-compliant trajectories have net present economic benefits but are not statistically different from zero. After mid-century, most scenarios have higher benefits than costs; these net benefits are most prominent in developing countries. We explore the robustness of results to an extensive set of damage functions published in the literature, and for most of the specifications examined, we cannot reject the null hypothesis of net benefits. Future research could improve these results with a better understanding of damage functions with greater coverage of damages and including adaptation and its cost.