Abstract. Both climate-change damages and climate-change mitigation will incur
economic costs. While the risk of severe damages increases with the level of
global warming (Dell et al., 2014; IPCC, 2014b, 2018; Lenton et al., 2008), mitigating
costs increase steeply with more stringent warming limits (IPCC, 2014a; Luderer et al., 2013;
Rogelj et al., 2015). Here, we show that the global warming limit that
minimizes this century's total economic costs of climate change lies between
1.9 and 2 ∘C, if temperature changes continue to impact national
economic growth rates as observed in the past and if instantaneous growth
effects are neither compensated nor amplified by additional growth effects
in the following years. The result is robust across a wide range of normative
assumptions on the valuation of future welfare and inequality aversion. We
combine estimates of climate-change impacts on economic growth for 186
countries (applying an empirical damage function from Burke et al., 2015)
with mitigation costs derived from a state-of-the-art energy–economy–climate
model with a wide range of highly resolved mitigation options (Kriegler
et al., 2017; Luderer et al., 2013, 2015). Our purely economic assessment,
even though it omits non-market damages, provides support for the
international Paris Agreement on climate change. The political goal of limiting
global warming to “well below 2 degrees” is thus also an economically optimal goal
given above assumptions on adaptation and damage persistence.
Economic Assessment of the Damages Caused by Global Warming