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Pathways toward limiting global warming to well below 2 ∘C, as used by the IPCC in the Fifth Assessment Report, do not consider the climate impacts already occurring below 2 ∘C. Here we show that accounting for such damages significantly increases the near-term ambition of transformation pathways. We use econometric estimates of climate damages on GDP growth and explicitly model the uncertainty in the persistence time of damages. The Integrated Assessment Model we use includes the climate system and mitigation technology detail required to derive near-term policies. We find an optimal carbon price of $115 per tonne of CO2 in 2030. The long-term persistence of damages, while highly uncertain, is a main driver of the near-term carbon price. Accounting for damages on economic growth increases the gap between the currently pledged nationally determined contributions and the welfare-optimal 2030 emissions by two thirds, compared to pathways considering the 2 ∘C limit only.
Climate change threatens to undermine efforts to eradicate extreme poverty. However, climate policies could impose a financial burden on the global poor through increased energy and food prices. Here, we project poverty rates until 2050 and assess how they are influenced by mitigation policies consistent with the 1.5 degrees C target. A continuation of historical trends will leave 350 million people globally in extreme poverty by 2030. Without progressive redistribution, climate policies would push an additional 50 million people into poverty. However, redistributing the national carbon pricing revenues domestically as an equal-per-capita climate dividend compensates this policy side effect, even leading to a small net reduction of the global poverty headcount (-6 million). An additional international climate finance scheme enables a substantial poverty reduction globally and also in Sub-Saharan Africa. Combining national redistribution with international climate finance thus provides an important entry point to climate policy in developing countries. Ambitious climate policies can negatively impact the global poor by affecting income, food and energy prices. Here, the authors quantify this effect, and show that it can be compensated by national redistribution of the carbon pricing revenues in combination with international climate finance.