Benefit-cost analyses of climate policies by Integrated Assessment Models (IAM) have generated conflicting assessments. Two critical issues affecting social welfare are regional heterogeneity and inequality. However, these have only partly been accounted for in existing frameworks.
The paper titled “Persistent inequality in economically optimal climate policies” – just published on Nature Communications and authored by Paolo Gazzotti, PhD student at Politecnico di Milano’s Department of Management, Economics and Industrial Engineering and Department of Electronics, Information, and Bioengineering, along with Prof. Massimo Tavoni (DIG), Prof. Andrea Castelletti (DEIB) and other researchers from the RFF-CMCC European Institute on Economics and the Environment and PBL Netherlands Environmental Assessment Agency – presents a benefit-cost model with more than 50 regions, calibrated upon emissions and mitigation cost data from detailed-process IAMs, and featuring country-level economic damages.
The authors compare countries’ self-interested and cooperative behavior under a range of assumptions about socioeconomic development, climate impacts, and preferences over time and inequality. Results indicate that without international cooperation, global temperature rises, though less than in commonly-used reference scenarios. Cooperation stabilizes temperature within the Paris goals (1.80∘C [1.53∘C–2.31∘C] in 2100). Nevertheless, economic inequality persists: the ratio between top and bottom income deciles is 117% higher than without climate change impacts, even for economically optimal pathways.