Editing IPCC:AR6/WGIII/Chapter-3 (section)

==== 3.6.1.2 Regional Mitigation Costs and Effort-sharing Regimes ====

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The economic repercussions of mitigation policies vary across countries (Aldy et al. 2016; [[#Hof--2017|Hof et al. 2017]] ): regional variations exist in institutions, economic and technological development, and mitigation opportunities. For a globally uniform carbon price, carbon-intensive and energy-exporting countries bear the highest economic costs because of a deeper transformation of their economies and of trade losses in the fossil markets ( [[#Stern--2012|Stern et al. 2012]] ; [[#Tavoni--2015|Tavoni et al. 2015]] ; [[#Böhringer--2021|Böhringer et al. 2021]] ). This finding is confirmed in Figure 3.35. Since carbon-intensive countries are often poorer, uniform global carbon prices raise equity concerns ( [[#Tavoni--2015|Tavoni et al. 2015]] ). On the other hand, the climate economic benefits of mitigating climate change will be larger in poorer countries (Cross-Working Group Box 1 in this chapter). This reduces policy regressivity but does not eliminate it ( [[#Taconet--2020|Taconet et al. 2020]] ; [[#Gazzotti--2021|Gazzotti et al. 2021]] ). Together with co-benefits, such as health benefits of improved air quality, the economic benefits of mitigating climate change are likely to outweigh mitigation costs in many regions ( [[#Li--2018|Li et al. 2018]] , 2019; [[#Scovronick--2021|Scovronick et al. 2021]] ).

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'''Figure 3.35 | a: regional mitigation costs in the year 2050 (expressed as GDP losses between mitigation scenarios and corresponding baselines, not accounting for climate change damages), under the assumption of immediate global action with uniform global carbon pricing and no international transfers, by climate categories for the 2°C (&gt;67%) and 1.''' '''5°C (&gt;50%) (with and without overshoot) categories. Right panel:''' policy costs in 2050 (as in panel a) for 2°C (&gt;67%) climate category C3 for scenario pairs that represent either immediate global action (‘immediate’) or delayed global action (‘delayed’) with weaker action in the short term, strengthening to reach the same end-of-century temperature target.

Regional policy costs depend on the evaluation framework ( [[#Budolfson--2021|Budolfson et al. 2021]] ), policy design, including revenue recycling, and on international coordination, especially among trade partners. By fostering technological change and finance, climate cooperation can generate economic benefits, both in large developing economies such as China and India ( [[#Paroussos--2019|Paroussos et al. 2019]] ) and industrialised regions such as Europe ( [[#Vrontisi--2020|Vrontisi et al. 2020]] ). International coordination is a major driver of regional policy costs. Delayed participation in global mitigation efforts raises participation costs, especially in carbon-intensive economies (Figure 3.35a. Trading systems and transfers can deliver cost savings and improve equity ( [[#Rose--2017a|Rose et al. 2017a]] ). On the other hand, measures that reduce imports of energy-intensive goods such as carbon-border tax adjustment may imply costs outside of the policy jurisdiction and have international equity repercussions, depending on how they are designed ( [[#Böhringer--2012|Böhringer et al. 2012]] , 2017; [[#Cosbey--2019|Cosbey et al. 2019]] ) ( [[IPCC:Wg3:Chapter:Chapter-13#13.6.6|Section 13.6.6]] ).

An equitable global emission-trading scheme would require very large international financial transfers, in the order of several hundred billion USD per year ( [[#Tavoni--2015|Tavoni et al. 2015]] ; [[#Bauer--2020|Bauer et al. 2020]] ; [[#van%20den%20Berg--2020|van den Berg et al. 2020]] ). The magnitude of transfers depends on the stringency of the climate goals and on the burden-sharing principle. Some interpretations of equitable burden sharing compliant with the Paris Agreement leads to negative carbon allowances for developed countries and some developing countries by mid-century ( [[#van%20den%20Berg--2020|van den Berg et al. 2020]] ), more stringent than cost-optimal pathways. International transfers also depend on the underlying socio-economic development ( [[#Leimbach--2019|Leimbach and Giannousakis 2019]] ), as these drive the mitigation costs of meeting the Paris Agreement ( [[#Rogelj--2018|Rogelj et al. 2018]] b). By contrast, achieving equity without international markets would result in a large discrepancy in regional carbon prices, up to a factor of 100 ( [[#Bauer--2020|Bauer et al. 2020]] ). The efficiency-sovereignty trade-off can be partly resolved by allowing for limited differentiation of regional carbon prices: moderate financial transfers substantially reduce inefficiencies by narrowing the carbon price spread ( [[#Bauer--2020|Bauer et al. 2020]] ).

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