The Paris Agreement on climate change aims to limit global warming to well below 2°C above pre-industrial levels. Analysing how to meet warming targets efficiently is of critical policy importance and economists have not perhaps afforded it the attention it deserves.

The authors of this comment respond to an argument put forward in the American Economic Review. In that article Lemoine and Rudik (2017) argue that it is efficient to delay reducing carbon emissions because there is substantial inertia in the climate system. Their conclusions diverge markedly from those of recent high-level policy syntheses, including the Stiglitz-Stern Report of the High-level Commission on Carbon Prices.

Mattauch et al. show in this response that there is in fact no substantial inertia – meaning a lag between carbon emissions and warming – that is relevant for climate policy. They conclude that a high immediate carbon price is required to meet the targets of the Paris Agreement efficiently.

Key points for decision-makers

  • Lemoine and Rudik (2017) conclude that if there is a substantial lag between carbon dioxide (CO2) emissions and warming, then warming can be limited to 2°C at much lower cost than standardly concluded, by delaying emissions reductions for decades and keeping carbon prices near zero until 2075.
  • Mattauch et al. show that Lemoine and Rudik’s conclusions are based on a possible misunderstanding of the climate physics literature: they are correct to state that the climate system displays substantial inertia, but only insofar as this statement relates to the atmospheric concentration (i.e. stock) of CO2.
  • However, there is no significant inertia between CO2 emissions (i.e. the flow) and resultant warming. The lack of lag between emissions and warming has been established for 10 years in the climate science literature.
  • Mattauch et al. apply a model consistent with state-of-the-art Earth System Modelling to the economics of Lemoine and Rudik. They show that this invalidates the article’s implications for climate policy.
  • Showing that it is this concept of inertia that matters for economic policy, Mattauch et al. find that a cost-effective carbon price that limits warming to the 2°C target starts high and increases at the interest rate.
  • The authors argue that it is more accurate to represent climate physics using the carbon budget approach, i.e. targets of warming translate to a certain maximum amount of cumulative emissions compatible with the target. The carbon budget approach simplifies the process of deriving cost-minimising carbon prices required to keep the global mean temperature rise below 2°C.
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