This paper provides a tool to build climate change scenarios to forecast Gross Domestic Product (GDP), modelling both GDP damage due to climate change and the GDP impact of mitigating measures. It adopts a supply-side, long-term view, with 2060 and 2100 horizons. It is a global projection tool (30 countries/regions), with assumptions and results both at the world and the country/regional level. Five different types of energy inputs are taken into account according to their CO2 emission factors. Full calibration is possible at each stage, with estimated or literature-based default parameters. Compared to other models, it provides a comprehensive modelisation of Total Factor Productivity (TFP), which is the most significant determinant of the GDP projected path. We present simulation results of different energy policy scenarios. They illustrate both the “tragedy of the horizon” and the “tragedy of the commons”, which call for a policy framework that adequately integrates a long run perspective, through a low-enough discount rate and an effective intergenerational solidarity as well as international cooperation.
This paper highlights how technology can contribute to reaching the 2015 Paris Agreement goals of net zero carbon dioxide (CO2) emissions and global warming below 2°C in 2100. It uses the Advanced Climate Change Long-term model (ACCL), particularly adapted to quantify the consequences of energy price and technology shocks on CO2 emissions, temperature, climate damage and Gross Domestic Product (GDP). The simulations show that without climate policies the warming may be +5°C in 2100, with considerable climate damage. An acceleration in ‘usual’ technical progress not targeted at reducing CO2- even worsens global warming and climate damage. According to our estimates, the world does not achieve climate goals in 2100 without ‘green’ technologies. Intervening only via energy prices, e.g. a carbon tax, requires challenging hypotheses of international coordination and price increase for polluting energies. We assess a multi-lever climate strategy combining energy efficiency gains, carbon sequestration, and a decrease of 3% per year in the relative price of ‘clean’ electricity with a 1 to 1.5% annual rise in the relative price of polluting energy sources. None of these components alone is sufficient to reach climate objectives. Our last and most important finding is that our composite scenario achieves the climate goals.