Ambitious Climate Action Pays Off

Action to mitigate climate change costs money - but damage caused by climate change also entails financial burdens, particularly for future generations. So how much action to mitigate climate change makes economic sense? To find out, an international team of researchers led by the Potsdam Institute for Climate Impact Research has fed an earlier computer simulation with current data and findings from climate science and economics. The research projects, with participation from environmental economists from Heidelberg University, have shown that limiting global warming to under two degrees - as agreed at the 2015 UN climate conference in Paris - produces an economically optimal balance between future damage caused by climate change and present mitigation costs. That would require a CO2 price of over USD 100 per ton. In 2018 William Nordhaus from Yale University (USA) won the Nobel Prize in Economics for integrating climate change into long-run macro-economic analysis. Specifically, the US scientist earned it with the aid of a computer simulation, the Dynamic Integrated Climate-Economy Model. The DICE model has now been updated based on recent research results from climate science and economic analysis.