KEY MESSAGES

Broader behavioural modelling exercises suggest a wide range of costs of climate-change mitigation and abatement, mostly lying in the range −2 to +5% of annual GDP by 2050 for a variety of stabilisation paths. These capture a range of factors, including the shift away from carbon-intensive goods and services throughout economies as carbon prices rise, but differ widely in their assumptions about technologies and costs.

Overall, the expected annual cost of achieving emissions reductions, consistent with an emissions trajectory leading to stabilisation at around 500–550ppm CO2e, is likely to be around 1% of GDP by 2050, with a range of +/−3%, reflecting uncertainties over the scale of mitigation required, the pace of technological innovation and the degree of policy flexibility.

Costs are likely to rise significantly as mitigation efforts become more ambitious or sudden, suggesting that efforts to reduce emissions rapidly are likely to be very costly.

The models arriving at the higher cost estimates for a given stabilisation path make assumptions about technological progress that are pessimistic by historical standards and improbable given the cost reductions in low-emissions technologies likely to take place as their use is scaled up.

Flexibility over the sector, technology, location, timing and type of emissions reductions is important in keeping costs down. By focusing mainly on energy and mainly on CO2, many of the model exercises overlook some low-cost abatement opportunities and are likely to over-estimate costs.