A New Global Deal on Climate Change

Abstract

A global target of stabilising greenhouse gas concentrations at between 450ppm CO2e and 550ppm CO2e has proven robust to recent developments in the science and economics of climate change. Retrospective analysis of the Stern Review indicates that the risks were underestimated, suggesting a stabilisation target closer to 450ppm CO2e. Climate policy at the international level is now moving rapidly towards agreeing an emissions pathway, and distributing responsibilities between countries. A feasible framework can be constructed in which each country takes on its own responsibilities and targets, based on a shared understanding of the risks and the need for action and collaboration on climate change. The global deal should contain six key features: (i) a pathway to achieve the world target of 50% reductions by 2050, where rich countries contribute at least 75% reductions; (ii) global emissions trading to reduce costs; (iii) reform of the clean development mechanism to scale-up emission reductions on a sectoral or benchmark level (iv) scaling up of research and development funding for low-carbon energy; (v) an agreement on deforestation; and (vi) adaptation finance.

Keywords: climate change, ethics, uncertainty, instrument choice, climate policy, game theory, emissions trading, clean development mechanism (CDM), international negotiations

JEL Classification: H41, Q54, Q56