Fair Share of GDP to Mitigate Climate Change Costs (according to DICE)

Christian P. Fries

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the fair share of GDP required to mitigate climate change costs, using an extended DICE model. A dedicated fund, supplied annually by a fixed fraction of GDP, is introduced to cover abatement and damage costs. Numerical analysis reveals that a funding rate of 2.4% of GDP is sufficient to meet all costs, enabling faster early abatement and reducing total emissions significantly. The proposed approach promotes intergenerational equity by distributing climate-related costs evenly across generations, overcoming the classical DICE model's limitations. We investigate the interplay of the model's discount rate and the required funding rate. For low to moderate discount rates the required funding rate is largely independent of the discount rate, while high discount rate lead to higher funding rates as nominal cost increase.

Keywords: Integrated Assessment Models; CO2-Price; Social Cost of Carbon; Interest Rate of Carbon; Intergenerational Equity; GDP (search for similar items in EconPapers)
JEL-codes: E17 Q54 (search for similar items in EconPapers)
Date: 2024-11-30
New Economics Papers: this item is included in nep-ene and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:123001

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