A multi-model assessment of inequality and climate change

nature climate change Article https://doi.org/10.1038/s41558-024-02151-7 A multi-model assessment of inequality and climate change Received: 16 January 2024 Accepted: 4 September 2024 Published online: xx xx xxxx Check for updates Johannes Emmerling 1,2 , Pietro Andreoni1,2,3, Ioannis Charalampidis4, Shouro Dasgupta 5,6,7, Francis Dennig8, Simon Feindt 9,10,11, Dimitris Fragkiadakis4, Panagiotis Fragkos4, Shinichiro Fujimori 12, Martino Gilli2,13, Carolina Grottera14, Celine Guivarch 15,16, Ulrike Kornek9,11,17, Elmar Kriegler 11,18, Daniele Malerba19, Giacomo Marangoni2,20, Aurélie Méjean 15,21, Femke Nijsse 22, Franziska Piontek 11, Yeliz Simsek22,23, Bjoern Soergel 11, Nicolas Taconet 11, Toon Vandyck 24, Marie Young-Brun 25,26, Shiya Zhao 12, Yu Zheng 27 & Massimo Tavoni 1,2,3 Climate change and inequality are critical and interrelated issues. Despite growing empirical evidence on the distributional implications of climate policies and climate risks, mainstream model-based assessments are often silent on the interplay between climate change and economic inequality. Here we fill this gap through an ensemble of eight large-scale integrated assessment models that belong to different economic paradigms and feature income heterogeneity. We quantify the distributional implications of climate impacts and of the varying compensation schemes of climate policies compatible with the goals of the Paris Agreement. By 2100, climate impacts will increase inequality by 1.4 points of the Gini index on average. Maintaining global mean temperature below 1.5 °C reduces long-term inequality increase by two-thirds but increases it slightly in the short term. However, equal per-capita redistribution can offset the short-term effect, lowering the Gini index by almost two points. We quantify model uncertainty and find robust evidence that well-designed policies can help stabilize climate and promote economic inclusion. Economic inequality between and within countries has become a major topic of debate. both in research and in society1–3. Inequality is interlinked with climate change mitigation and impacts, because of the regressive impacts of carbon taxes or higher energy prices4,5 and of social repercussions and acceptability of climate policies. An increasing body of literature has explored the distributional effects of climate policies6–8, poverty9 and climate impacts between and within countries10–12, suggesting that both climate policy and climate impacts affect more the lower end of income distribution. However, carbon revenues redistribution can address the adverse distributional implications of climate and energy policies12–15. Redistribution of carbon market revenues has been advocated to ensure that vulnerable households and businesses are sheltered A full list of affiliations appears at the end of the paper. Nature Climate Change from higher energy expenditures due to carbon pricing, in the hope of increasing support for climate policy (for example, the European Association of Environmental and Resource Economists’ statement signed by more than 1,700 economists: www.eaere.org/statement). The European Union recently approved a climate policy package that establishes a Social Climate Fund to be financed with emission trading scheme revenues. Even if the impact on policy support might not be as strong as theoretically predicted16, ‘climate dividends’ or lump sum transfers could have major impacts on inequality and poverty alleviation17,18 and become even more relevant as a result of the pandemic, the energy crisis and the ongoing inflationary period19. The empirical evidence on public opinion support for redistribution is mixed: equal per-capita (EPC), or targeted (on poor households), e-mail: ; Article https://doi.org/10.1038/s41558-024-02151-7 Impact on Gini index by model and model type +0 +0.2 Ag. 88% Ag. 88% –2 + RICE50 NICE AIM GEM-E3 Imaclim ReMIND 2 0 +0.4 Ag. 100% +0.1 Ag. 100% +0.1 Ag. 88% –2.4 Ag. 88% –0.7 +0.1 Ag. 88% Ag. 71% Paris WITCH E3ME –2 0 –4 –8 –12 +NAGIRWE +NAGIRWE 2030 2050 Paris with EPC Change in Gini from Reference (points) 0 +1.4 Ag. 86% No climate policy 2 Model Type CB-IAM CGE DP-IAM Macroeconometric 2100 2030 2050 Less than 66% model agreement Model median –6 –4 –2 0 Fig. 1 | Change in Gini index from the Reference scenario without climate impacts. The top row shows the case of no climate policy, the middle row the Paris scenario and the bottom row shows the Paris scenario including EPC transfers. All individual countries are shown as points and all scenarios include climate impacts. Also included are the distributional consequences of climate damages. Models are categorized (colour and letter coded on the x axis using the first letter of each model (‘+’ for RICE50+)) and ordered and clustered by model type. Bottom, maps of the model median in 2030 and 2050. Numbers in black indicate median values pointing by the arrow to the median value. Note the different y axis scales across panels. Countries with less than two-thirds model agreement are shaded. Ag., agreement among models in terms of sign. carbon tax redistribution has strong support in middle-income countries but lower support in high-income countries20. Redistribution of carbon revenues could also be combined with international between-country effort-sharing schemes21, increasing the revenues available in developing countries. Inequality is also affected by the uneven distribution of climate impacts and risks within and between countries. The advancements in estimation of impact functions of climate change with improved datasets and empirical methods22–25, and highlight major regional discrepancies of climate risks, with potentially large implications of increasing inequalities across countries26–28. Recent empirical studies have found that climate impacts increase within-country inequality11,29–33, in particular in low- or middle-income countries34. To date, however, assessments focus on the distributional effects of climate policies without considering the effect of climate impacts both within and between countries, with some exceptions10,12,35. Despite their relevance, climate–inequality interlinkages are not yet routinely included in mainstream climate–economy models, although individual modelling studies have explored policy incidence36,37: no scenario reported in the IPCC 6th assessment report database reports economic inequality indicators. One exception is a recent Energy Modelling Forum study38, although this focused on international emission trading and is limited to computable general equilibrium models. Overall income deciles differ including in terms of in particular energy expenditures (Supplementary Fig. 1). This Article provides a model comparison explicitly designed to investigate the link between climate change and inequality, quantifying the distributional implications of climate policies and climate change impacts. We do (...truncated)