Economy and climate protection: a two-degree target also makes sense from an economic perspective

If the temperature rises between 1.5 degrees Celsius and 1.8 degrees Celsius, the “cost-benefit optimum” would be achieved, if one considers the costs of the measures against anthropogenic climate change and the expected damage, researchers report in the journal “Nature Climate Change «. That would be compatible with the Paris climate goals from 2016, which aim for global warming to well below two degrees Celsius compared to pre-industrial times. The researchers used the so-called DICE model (Dynamic Integrated Climate-Economy Model) with updated parameters for their study. In doing so, they contradict the developer of the model, the American economist and Nobel laureate William Nordhaus, who calculated that the two-degree target would be “economically suboptimal” and, due to high social costs, hardly achievable. His calculation had shown that the optimal global warming, taking into account the costs for the measures, would be around 3.5 degrees Celsius by the year 2100.

The DICE model was developed by William Nordhaus over decades. In principle, it tries to use the instruments of modern economics to determine an efficient strategy for coping with the threat of global warming. According to the team of authors, however, some parameters of the DICE model no longer corresponded to the current state of climate science. Therefore, they now used newer modules, among other things, for simulating the carbon dioxide cycle and for the damage presumably caused by climate change. In addition, they adapted the values ​​represented by so-called Social Discount Rates (SDRs) on intergenerational prosperity – i.e. which ethical, but also economic decisions should be made when it comes to the transfer of prosperity between generations. Since these SDRs are often subjective, the authors have replaced the parameters originally used in the DICE model with the median of expert opinions generated in two different ways from a survey of 173 experts.

German experts unanimously rate the study as relevant, as a survey by the Science Media Center revealed. “The publication is of great importance for the climate debate,” says climate economist Ulrike Kornek from the Mercator Research Institute on Global Commons and Climate Change (MCC) in Berlin. The results would show that ambitious climate protection is worthwhile if the avoided climate damage is offset against the costs of climate protection. The economist Reimund Schwarze from the Helmholtz Center for Environmental Research (UFZ) in Leipzig says: “The method used in the study corresponds to the state-of-the-art of climate economics.” In his view, the authors included the most important factors.

“This is a very relevant study that shows that the two-degree target must also be achieved from an economic point of view, otherwise the economic damage caused by global warming will be greater than the adaptation costs.”
(Christian Franzke from the School of Engineering and Science at Jacobs University Bremen)

The meteorologist Christian Franzke from the School of Engineering and Science at Jacobs University Bremen also says that the version of the DICE model used is state-of-the-art. “This is a very relevant study that shows that from an economic point of view, the two-degree target must be achieved, otherwise the economic damage caused by global warming will be greater than the adaptation costs.” This will be the case with the currently planned national emission savings But not reaching the goal, he believes. Instead, we would be heading for global warming of up to 3.1 degrees with correspondingly higher damage.