Ratcheting up Paris

Humberto Llavador, John E. Roemer and Thomas Stoerk

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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? To answer this question, 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 the 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: climate economics; climate policy; international environmental agreement; Paris agreement (search for similar items in EconPapers)
JEL-codes: J1 (search for similar items in EconPapers)
Date: 2026-09-24
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Published in European Economic Review, 24, September, 2026, 190. ISSN: 0014-2921

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:141247

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