At the COP21, about 160 countries proposed the so-called INDCs that define GHG abatement objectives by 2030. While encouraging, these commitments are not ambitious enough to achieve the 2°C threshold by 2100, and further negotiations are needed. There is, therefore, a necessity to assess the economic consequence of a pathway to 2°C and the fair sharing of this burden. In this paper, we use a game theoretic approach for the design of fair agreements concerning additional abatements up to 2050. The simulations performed with our model confirm the weakness of INDC pledges but show that, with political determination, an equitable burden-sharing agreement can be achieved with very reasonable costs for all nations of approximately 0.8% of total discounted household consumption. With a more ambitious 1.5°C target, global cost is multiplied by a factor of four revealing the stringency of such an objective. Numerical results also show that the implementation of an international carbon market and participation of all countries in the game are crucial elements for reaching equitable burden-sharing among countries. For example, considering a reduced G20 coalition, welfare losses are multiplied by a factor of three for coalition members. Our simulations also permit a first evaluation of the possible impacts of the recently announced USA withdrawal from the Paris agreement.
Keywords: Climate negotiations, Burden sharing, COP21, Meta-game, Fair agreement, Computable general equilibrium, USA withdrawal
