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Integrated assessment models can help quantifying the implications of international climate agreements and regional climate action. This paper reviews scenario results from model intercomparison projects to explore different possible outcomes of post 2020 climate negotiations, recently announced pledges and their relation to 2°C. We provide key information for all the major economies such as the year of emission peaking, the regional carbon budgets and emissions allowances. We highlight the distributional consequences of climate policies, and discuss the role of carbon markets for financing clean energy investments, and achieving efficiency and equity.So far, international climate policy has been ineffective in curbing the rise of global greenhouse-gas emissions. Still, ambitious climate targets such as the 2°C target require a phase-out of global emissions by the end of the century, and an active participation of all world regions in climate policy 1 . Given the many obstacles to global cooperative action on climate change, the question remains how diverse national climate policies can be coordinated and strengthened globally. Within the United Nations Framework Convention on Climate Change (UNFCCC), the Durban Platform for Enhanced 2 Action 2 provides an important platform for a post-2020 international climate agreement. It contains several innovative elements, most notably a focus on the major economies that goes beyond the traditional divide between Annex I and non-Annex I countries. The Durban platform calls for a new climate treaty to be agreed in 2015 and implemented as early as 2020. The recently announced USChina climate deal and the EU climate framework provide encouraging steps forwards, but aligning the incentives of the major emitters in pursuing stringent climate policies remains a challenge. In this paper, we aim at assessing the implications of post 2020 climate policies with specific reference to the major economies. We provide quantitative estimates of regional emission budgets, timing of emission peaking, and distribution of mitigation costs. We examine the role of carbon markets and different burden sharing schemes to alleviate distributional inequalities and finance the investment needs in low carbon mitigation technologies. In order to quantify these policy relevant variables, we resort to global models.Integrated assessment models (IAMs) are tools designed to investigate the implications of achieving climate and other objectives in an integrated and rigorous framework. They are numerical models that account for major interactions among energy, land-use, economic and climate systems. Model differ in the economic, technological and sectoral representation and in the way they are solved, with some models maximizing an inter-temporal objective function (such as economic activity) and others simulating a set of equilibria (see the SOM for individual model description and references to documentation). Models generate global long-term scenarios for a number of regions or countries that ca...
The transition to a low‐carbon economy will entail a large‐scale structural change. Some industries will have to expand their relative economic weight, while other industries, especially those directly linked to fossil fuel production and consumption, will have to decline. Such a systemic shift may have major repercussions on the stability of financial systems, via abrupt asset revaluations, defaults on debt, and the creation of bubbles in rising industries. Studies on previous industrial transitions have shed light on the financial transition risks originating from rapidly rising “sunrise” industries. In contrast, a similar conceptual understanding of risks from declining “sunset” industries is currently lacking. We substantiate this claim with a critical review of the conceptual and historical literature, which also shows that most literature either examines structural change in the real economy, or risks to financial stability, but rarely both together. We contribute to filling this research gap by developing a consistent theoretical framework of the drivers, transmission channels, and impacts of the phase‐out of carbon‐intensive industries on the financial system and on the feedback from the financial system into the rest of the economy. We also review the state of play of policy aiming to protect the financial system from transition risks and spell out research implications. This article is categorized under: Climate Economics > Economics and Climate Change
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