Purdue study finds limited economic impacts of US accession to Paris climate agreement

WEST LAFAYETTE, Ind. – President Biden re-engaged the United States in the Paris climate agreement and also moved forward with a climate plan calling for carbon-free electricity by 2035 and net-zero emissions by 2050 – compatible policies with and beyond the 2 degrees C mitigation effort requested in the initial Paris Agreement.

While Biden’s policies are expected to bring multiple benefits to the environment and public health, their implementation could result in additional costs to the U.S. economy and influence the energy sector, agricultural producers, households, and others. other agents. To understand these impacts, a study conducted by researchers at Purdue, Maksym chepeliev and Dominique van der Mensbrugghe of the Agricultural Economics Department, in collaboration with Israel Osorio-Rodarte of the World Bank, examined both the costs of these mitigation efforts and how they would be distributed among different producer and consumer groups.

The researchers compared the potential impacts of commitments from the 195 parties that signed the Paris Agreement (called the Nationally Determined Contribution, or NDC), unchanged U.S. climate policy, and new policies announced by the Biden administration. The analysis was carried out using a global computable general equilibrium model ENVISAGE, based on the World Trade Analysis Project(GTAP) and the World Bank’s GIDD microsimulation model to examine economic growth and income distribution.

“Adopting more aggressive climate change mitigation policies would result in a gradual distribution of income, while negative macroeconomic impacts would be very limited,” Chepeliev said. “In addition, the benefits of adopting more stringent mitigation efforts would have a significant positive influence on the environment and health. “

One of the main findings of the study is the effect that climate action will have on income distribution in the United States, mainly due to lower food price increases (1.1%) compared to the change in non-food prices (1.8%), as part of an ambitious 2 degree C mitigation effort. This change will mainly result from the increase in energy prices and the costs of fuel and transport, which must be included in the cost of goods and services. However, since low-income households generally spend less on non-food items, their financial burden will be considerably less than that of high-income households.

The implementation of the American NDC, in the absence of global emissions trading, would lead to a reduction in real income of only 0.17% in 2030. A more ambitious policy, consistent with the limitation of global warming climate below 2 degrees C, would reduce real income by 0.55%. If the United States and other countries engage in cooperative climate actions that incorporate emissions trading, the corresponding real income losses are significantly reduced (0.06% and 0.27% respectively) .

Climate change mitigation policies would negatively impact “dirty” jobs by reducing fossil fuel extraction and power generation from fossil fuels and stimulate the creation of new “green” jobs in production renewable electricity. In the NDC scenario (and without climate cooperation), coal production would decrease by 23.7% in 2030, followed by electricity production from fossil fuels (-21.0%), natural gas (-19 , 1%), crude oil (-5.0%). and petroleum products (-3.3%). Electricity production from non-fossil fuels would increase by 6%. With a more ambitious 2 degree C mitigation effort, fossil fuel-based electricity generation would see its production halved and non-fossil fuel production would increase by around 15%, further boosting the transition to a green economy in the United States.

“Compared to other high-income countries – EU, Canada, Australia and New Zealand – the cost of reducing emissions in the United States is much lower,” Chepeliev said. “Combined with positive distributive impacts, environmental and health co-benefits, climate change mitigation is a win-win policy to be implemented in the years to come. “

The full report, “US Climate Policy Revisited: Macroeconomic and Distributional Impacts of the Paris Agreement,” has been published on the Purdue Agricultural Economics Report website and is available.

Writer: We are Goodwin, [email protected]

Sources: Maksym Chepeliev

Dominique van der Mensbrugghe

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