Abstract
The large majority of climate change mitigation scenarios that hold warming below 2 °C show high deployment of carbon dioxide removal (CDR), resulting in a peak-and-decline behavior in global temperature. This is driven by the assumption of an exponentially increasing carbon price trajectory which is perceived to be economically optimal for meeting a carbon budget. However, this optimality relies on the assumption that a finite carbon budget associated with a temperature target is filled up steadily over time. The availability of net carbon removals invalidates this assumption and therefore a different carbon price trajectory should be chosen. We show how the optimal carbon price path for remaining well below 2 °C limits CDR demand and analyze requirements for constructing alternatives, which may be easier to implement in reality. We show that warming can be held at well below 2 °C at much lower long-term economic effort and lower CDR deployment and therefore lower risks if carbon prices are high enough in the beginning to ensure target compliance, but increase at a lower rate after carbon neutrality has been reached.
Highlights
The large majority of climate change mitigation scenarios that hold warming below 2 °C show high deployment of carbon dioxide removal (CDR), resulting in a peak-and-decline behavior in global temperature
It was shown that additional demand-side policies and assumptions about lifestyle changes[10] or low energy demand[11] reduce the need for bioenergy with carbon capture and storage (BECCS) and benefit sustainability, but the economic drivers for CDR were not directly attacked and carbon removals were partly shifted to afforestation
Golosov et al.[16] find an optimal carbon tax to increase at the rate of GDP growth – which is lower than the interest rate – under the assumption of constant savings and logarithmic utility, if both economic damages increasing linearly with GDP and mitigation costs are taken into account
Summary
The large majority of climate change mitigation scenarios that hold warming below 2 °C show high deployment of carbon dioxide removal (CDR), resulting in a peak-and-decline behavior in global temperature This is driven by the assumption of an exponentially increasing carbon price trajectory which is perceived to be economically optimal for meeting a carbon budget. The question remains how the economics of a robust, low-risk mitigation pathway can look like even if lifestyle changes and efficiency measures do not run as deeply as envisaged in these scenarios To this end, it was shown that a reduction of the discount rate can reduce the temporary exceedance of an end-of-century carbon budget and, the amount of net-negative emissions[12]. It is very close to the numbers in Nordhaus
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