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Carbon pricing: Necessary but not sufficient

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  • Cleary, Sean
  • Willcott, Neal

Abstract

Global carbon pricing has been recognized as one of the most efficient mechanisms that can be used to reduce CO2 emissions, but questions remain about the magnitude of the price and the speed of implementation. We examine this important issue by extending the Dynamic Integrated Climate and Economy (DICE) model to estimate global carbon prices that will be required to reach various warming scenarios. Our analysis suggests that while carbon pricing can play a critical role in reducing greenhouse gas emissions and limiting global warming, it must be supported by other policy measures and innovations in order to reach the Paris Agreement targets. In particular, we found there was no feasible carbon pricing scenario that was high enough to limit emissions sufficiently to achieve anything below 2.4°C warming on its own. We project significant differences in global physical costs due to climate change across various warming scenarios, which range from a total (to 2100) of $152tr under a 1.5° scenario to $765tr under 4.2° warming.

Suggested Citation

  • Cleary, Sean & Willcott, Neal, 2024. "Carbon pricing: Necessary but not sufficient," Finance Research Letters, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:finlet:v:68:y:2024:i:c:s154461232401047x
    DOI: 10.1016/j.frl.2024.106017
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    References listed on IDEAS

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    More about this item

    Keywords

    Climate change; Physical risk; Sustainability; Carbon pricing;
    All these keywords.

    JEL classification:

    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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