Limiting Warming to 2°C Would Have a Steep Cost—Perhaps too Steep, Study Shows

C02 Emissions and Temperature Under the Paris Agreement

Notes: This Figure displays the evolution of carbon emissions and global temperature in the business-as-usual scenario and under the coordinated Paris Agreement implementation. It also presents the evolution in the most extreme Intercontinental Panel on Climate Change (IPCC) scenario, RCP 8.5. The Figure shows that, even when the whole world commits to the Paris Agreement, the pledges only have a minuscule effect in reducing carbon emissions and limiting warming. Under the business-as-usual scenario, a global temperature increase of 2°C relative to pre-industrial levels is reached in the year 2043. The Paris Agreement delays the date at which we cross this threshold by only three years. That is, although the agreement might be politically consequential to build toward future agreements, the involved pledges are very far from achieving its stated goal.

All regions of the world do not—and will not—experience the effects of CO2 emissions in the same way. Some will suffer greatly from climate change, while others may even benefit. These heterogeneous effects mean that different countries will have differing incentives to abide by the Paris Agreement, which aims to limit global warming below 2°C relative to pre-Industrial levels.

In a study by UChicago economist Esteban Rossi-Hansberg, and his co-author José-Luis Cruz of Princeton University, the authors assess the local social cost of carbon and how that cost aligns with the carbon reduction pledges countries made under the Paris Agreement. They find that while the distribution of carbon reduction pledges in the Paris Agreement is roughly in line with the local social cost of carbon, the pledges have only a very small impact on reducing emissions and limiting warming.

The chart shows the evolution of carbon emissions and global temperature 1) in the business-as-usual scenario, 2) under the Paris Agreement pledges, and 3) under the most extreme scenario of climate change according to the Intercontinental Panel on Climate Change (RCP 8.5). Under business-as-usual, the world would reach the 2°C limit in 2043. The Paris pledges delay crossing that threshold by only three years.

To achieve the Agreement’s goal to limit warming below 2°C over the current century would require setting at least a $200 per ton carbon tax throughout the world.

“Setting such a high tax on carbon is probably unrealistic, especially in developing countries,” says Rossi-Hansberg, the Glen A. Lloyd Distinguished Service Professor in Economics. “To make achieving the 2°C target more palatable to countries, we must develop technologies and install capital that make the substitution between fossil fuels for clean energy sources less costly.”