About the Project This study examines potentially efficient global decarbonisation pathways that incorporate mitigation and adaptation to achieve more cost-effective outcomes. It forms part of a joint research program into practical approaches to climate change policy being undertaken by KAPSARC and the Institute of Energy Economics, Japan (IEEJ). This research program aims to help inform the debate around the development of more practical and cost-effective ways to help close the gap between national contributions and agreed global goals in the context of future climate negotiations. Key Points This paper presents an analysis of the climate and economic impacts of four different carbon emission scenarios. The scenarios include: a ‘business as usual’ reference scenario; a carbon emission mitigation scenario designed to meet the Paris Agreement goal of limiting average global temperature increases to no more than 2o Celsius (C) by 2100; and two scenarios that seek to optimize global welfare taking into account the total costs associated with carbon mitigation, adaptation and damage, one with more rapidly declining low-carbon or zero-carbon technology costs after 2050. Key insights include the following: Under the optimal global welfare case with more rapidly declining technology costs after 2050, global average temperature increases peak at between 2.3oC and 2.7oC, which is above the level achieved under the 2oC by 2100 scenario. However, the 2o C scenario, which relies exclusively on mitigation responses, requires very high carbon prices to achieve its goals; above $250/ton carbon dioxide equivalent (CO2 e) by 2050 and over $1,200/ton CO2 e in 2100 (prices are in real 2014 U.S. dollars). This is reflected in a disproportionately high total economic cost between now and 2100, reaching around 4 percent of global gross domestic product (GDP) by 2090. By comparison, carbon prices associated with the optimal global welfare cases are less than $50/ ton CO2 e by 2050, and between $175/ton CO2 e (standard optimal case) and $300/ton CO2 e (optimal case with more rapidly declining technology costs) in 2100. The total economic costs under the optimal global welfare scenarios never exceed 3 percent of global GDP, with the cost peaking at 2.6 percent of global GDP around 2130 under the optimal scenario, with more rapidly declining technology development costs after 2050. This analysis suggests that a more pragmatic approach to tackling climate change (referred to as a practical approach hereafter) which balances mitigation, adaptation and damage is likely to minimize the overall cost to society. It also highlights the potential economic benefits associated with accelerating the development and deployment of cost effective low- and zero-carbon technologies. Governments have a crucial role to play to support effective research and development in this context. Scope remains to develop more practical and flexible approaches to climate policy that are clear, predictable and able to effectively evolve as the transition to a decarbonized global economy unfolds.

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