Ratcheting up Paris

Humberto Llavador (), John Roemer and Thomas Stoerk
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Humberto Llavador: https://www.upf.edu/web/econ/faculty/-/asset_publisher/6aWmmXf28uXT/persona/id/3418654

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: The Paris Agreement is designed to increase climate ambition gradually through a process of ratcheting up. What is the plausible endpoint of this process? We develop a tractable integrated assessment model in which countries interact through a decentralized general equilibrium and negotiate unanimously over a global carbon budget, with all mitigation implemented via a global carbon price. We prove existence and uniqueness of a unanimous international agreement on global emissions, in which carbon pricing revenues are redistributed across countries in proportion to marginal climate damages. In a quantitative application for 154 countries, the resulting equilibrium limits global mean surface temperature change to 1.51◦C, at a carbon price of 320 USD/tCO2. The associated international transfers of carbon pricing revenue are progressive toward lower-income countries and amount to about 0.8% of global GDP annually - an order of magnitude larger than the Paris Agreement’s climate finance target.

Keywords: Paris Agreement; climate policy; international environmental agreement; climate economics (search for similar items in EconPapers)
JEL-codes: F35 F53 Q54 Q56 Q58 (search for similar items in EconPapers)
Date: 2025-12
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