Mitigating climate change to alleviate economic inequality under the Paris Agreement

Abstract

Understanding the implications of global climate governance is critical for achieving sustainable economic development, given that the economic impacts of climate change and policies are disproportionately distributed across regions. We estimate the updated damage functions and construct an uncertainty analysis framework to assess whether stringent climate policies entail economic benefits in terms of growth and inequality. The findings show that although climate policies slow the pace of economic growth, the benefits of avoided damage may overweight policy costs in the long run. Moreover, pursuing the 1.5°C goal slows economic catch-up of poor countries in the short to medium term relative to 2°C, but improves global inequality in the long run. This situation may, however, change when moving to a fast-growing and fossil-fueled world, in which inequalities gradually decline but start to rise after 2065. This study highlights the importance of synergizing the stringent 1.5°C goal with economic inequality alleviation.