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Both climate-change damages and climate-change mitigation will incur economic costs. While the risk of severe damages increases with the level of global warming (Dell et al., 2014; IPCC, 2014b, 2018; Lenton et al., 2008), mitigating costs increase steeply with more stringent warming limits (IPCC, 2014a; Luderer et al., 2013; Rogelj et al., 2015). Here, we show that the global warming limit that minimizes this century's total economic costs of climate change lies between 1.9 and 2 ∘C, if temperature changes continue to impact national economic growth rates as observed in the past and if instantaneous growth effects are neither compensated nor amplified by additional growth effects in the following years. The result is robust across a wide range of normative assumptions on the valuation of future welfare and inequality aversion. We combine estimates of climate-change impacts on economic growth for 186 countries (applying an empirical damage function from Burke et al., 2015) with mitigation costs derived from a state-of-the-art energy–economy–climate model with a wide range of highly resolved mitigation options (Kriegler et al., 2017; Luderer et al., 2013, 2015). Our purely economic assessment, even though it omits non-market damages, provides support for the international Paris Agreement on climate change. The political goal of limiting global warming to “well below 2 degrees” is thus also an economically optimal goal given above assumptions on adaptation and damage persistence.
Cost degression in photovoltaics, wind-power and battery storage has been faster than previously anticipated. In the future, climate policy to limit global warming to 1.5–2 °C will make carbon-based fuels increasingly scarce and expensive. Here we show that further progress in solar- and wind-power technology along with carbon pricing to reach the Paris Climate targets could make electricity cheaper than carbon-based fuels. In combination with demand-side innovation, for instance in e-mobility and heat pumps, this is likely to induce a fundamental transformation of energy systems towards a dominance of electricity-based end uses. In a 1.5 °C scenario with limited availability of bioenergy and carbon dioxide removal, electricity could account for 66% of final energy by mid-century, three times the current levels and substantially higher than in previous climate policy scenarios assessed by the Intergovernmental Panel on Climate Change. The lower production of bioenergy in our high-electrification scenarios markedly reduces energy-related land and water requirements.