Effort sharing taking into account adaptation costs and climate change damage

Abstract

The ongoing discussion about the feasibility of maintaining global temperatures below 2 °C encompasses not only the costs and benefits of achieving the target, but also the difficulty of reconciling regional efforts with the inequity of climate change impacts. If mitigation and adaptation actions, as well as residual damage from climate change, will be distributed diversely across the world, can we devise a policy which aligns different country and regional views and incentives? In most of the scientific literature, equity issues related to mitigation, adaptation, and impacts have been disconnected. Most studies on effort sharing have focused on fair distributions of mitigation costs without considering adaptation costs and residual damage. Our study aims to fill this gap by investigating which mitigation targets in 2030 and 2050 lead to equalizing the sum of mitigation costs, adaptation costs, and residual damage as share of GDP across regions. We employ two alternative modelling frameworks combined with two sets of regional climate change impact functions. These models provide a mapping of the residual climate change damages of 2 °C and of the resulting adaptation costs, and allow exploring how emission rights should be allocated to equalize the sum of mitigation costs, residual damage, and adaptation costs as share of GDP across regions. We show that a 2 °C world leaves considerable residual impacts and adaptation costs. Sharing the burden of the total costs of climate change, including residual damage and adaptation costs, reshuffles the emission allocation compared to an effort-sharing regime based on mitigation costs only. The financial implications can be significant, with a total of additional resources in the order of 100-200 USD billions in 2030 would need to flow to the high impact countries in India, Africa, and Rest of Asia, by means of trading emission rights. Countries with lower-than-average impacts, such as OECD countries and China, would buy such rights thereby financing those transfers. The above numbers assume a global carbon market being in place from 2020 onwards. Even though such a global carbon market with the implied sharing rules is not easy to implement, our paper suggests that accounting for the total costs of climate change and including adaptation and damage considerations could achieve an effort distribution being perceived fair by a wider group of countries.