Inequality, Climate Impacts on the Future Poor, and Carbon Prices

Proceedings of the National Academy of Sciences (Dec. 29, 2015 v112 n52 p15827-15832; doi: 10.1073/pnas.1513967112) / by Francis Dennig,  et al.
http://www.pnas.org/content/112/52/15827.short

[Significance] Hundreds of published papers produce “optimal” trajectories of global emissions of carbon dioxide, and corresponding carbon prices, over this century, taking into account future damages inflicted by climate change. To our knowledge, in all instances the models ignore inequalities in economic variables beyond regional differences. Here, we introduce heterogeneous subregional populations (distributed by income) and explore how the optimal trajectories are affected by whether regional damage afflicts the poor predominantly. We find that when future damage falls especially hard on the poor, considerably greater global mitigation effort is optimal than when damage is proportional to income.

[Abstract] Integrated assessment models of climate and the economy provide estimates of the social cost of carbon and inform climate policy. We create a variant of the Regional Integrated model of Climate and the Economy (RICE)—a regionally disaggregated version of the Dynamic Integrated model of Climate and the Economy (DICE)—in which we introduce a more fine-grained representation of economic inequalities within the model’s regions. This allows us to model the common observation that climate change impacts are not evenly distributed within regions and that poorer people are more vulnerable than the rest of the population. Our results suggest that this is important to the social cost of carbon—as significant, potentially, for the optimal carbon price as the debate between Stern and Nordhaus on discounting.

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