Social cost of carbon under a carbon-neutral pathway

Abstract

Climate change is the challenge of the century, and achieving the goals of the Paris Agreement will require worldwide cooperation and mutual effort. Over 120 countries have made their net-zero commitments, and quantifying the social cost of carbon (SCC), i.e. the climate damage caused by an additional ton of CO2 emissions, under a carbon-neutral pathway would provide a carbon price benchmark for policymakers. Here, we set in detail the emission trajectories of different jurisdictions under a carbon-neutral pathway based on the submitted nationally determined contributions. We then assess global and regional warming, climate change damages, and the SCC with the Policy Analysis of Greenhouse Effect integrated assessment model. We find a peak warming of about 2.1 °C relatives to pre-industrial levels in this century under our carbon-neutral emission pathway. And even if all countries meet their carbon-neutral commitments, this would not be sufficient to limit global warming to 1.5 °C relative to pre-industrial levels. We compare the SCC using fixed discount rates, dynamic discounting, and an equity weighting approach. Notably, the introduction of equity weights would increase the estimated SCC from 79 (11–186) to 291 (83–592) US$ per tCO2. Climate change damages will be borne primarily by warmer and poorer countries, and this profound inequality would likely undermine efforts to eradicate extreme poverty. Statistics on current carbon taxes and carbon trading prices show that they are notably lower than global or even regional SCCs, suggesting that the current system does not adequately reflect the global externalities of CO2 emissions. More studies are needed to assess the equity aspects of climate change impacts, to help refine mechanisms to align domestic interests with global interests, and to facilitate the implementation of national carbon-neutral commitments in place.