Template-Type: ReDIF-Paper 1.0
Title: Debt and damages: what are the chances of staying under the 2°C warming threshold?
Number: c4d3544b-f639-405a-9f76-cd8e0cd32554
Handle: RePEc:avg:wpaper:en7717
Publication-Status: Published in Research Papers
Author-Name:  Florent MCISAAC
Author-Name: Oskar LECUYER
Author-Name: Emmanuel BOVARI
Abstract: In a stock-flow consistent macrodynamic model featuring two crucial endogenous destabilizing channels, namely debt accumulation and climate change, we perform a sensitivity analysis on four fundamental parameters of the climate and economic systems: the climate sensitivity, the inertia of the carbon cycle, the labor productivity growth, and the share of damages sustained by the capital stock. We find that we have a mere 0.36% chance of achieving the 2°C warming target of the Paris Agreement in a no policy scenario, while a carbon tax and a subsidy to mitigation efforts increase that probability to 5.64% and 25.6% respectively. We also investigate the trade-off between mitigating climate change damages and staying in a sustainable debt trajectory. While implementing effective climate policies comes at the cost of increasing the debt burden, the increasing risk of over-indebtedness seems to be limited even for very stringent policies.
Creation-Date: 2017-11-21
File-URL: https://www.afd.fr/sites/afd/files/2017-11/pr-60-warming-threshold-Bovari-Lecuyer-Mc-Isaac.pdf
File-Format: Application/pdf
Classification-JEL: Q
Length: 21