The Economics of 1.5°C Climate Change

Abstract

The economic case for limiting warming to 1.5°C is unclear, due to manifold uncertainties. However, it cannot be ruled out that the 1.5°C target passes a cost-benefit test. Costs are almost certainly high: The median global carbon price in 1.5°C scenarios implemented by various energy models is more than US$100 per metric ton of CO2 in 2020, for example. Benefits estimates range from much lower than this to much higher. Some of these uncertainties may reduce in the future, raising the question of how to hedge in the near term. Maintaining an option on limiting warming to 1.5°C means targeting it now. Setting off with higher emissions will make 1.5°C unattainable quickly without recourse to expensive large-scale carbon dioxide removal (CDR), or solar radiation management (SRM), which can be cheap but poses ambiguous risks society seems unwilling to take. Carbon pricing could reduce mitigation costs substantially compared with ramping up the current patchwork of regulatory instruments. Nonetheless, a mix of policies is justified and technology-specific approaches may be required. It is particularly important to step up mitigation finance to developing countries, where emissions abatement is relatively cheap.