Influence of climate change impacts and mitigation costs on inequality between countries

Climate change affects inequalities between countries in two ways. On the one hand, rising temperatures from greenhouse gas accumulation cause impacts that fall more heavily on low-income countries. On the other hand, the costs of mitigating climate change through reduced emissions could slow down the economic catch-up of poor countries. Whether, and how much the recent decline in between-country inequalities will continue in the twenty-first century is uncertain, and the existing projections rarely account for climate factors. In this study, we build scenarios that account for the joint effects of mitigation costs and climate damages on inequality. We compute the evolution of country-by-country GDP, considering uncertainty in socioeconomic assumptions, emission pathways, mitigation costs, temperature response, and climate damages. We analyze the resulting 3408 scenarios using exploratory analysis tools. We show that the uncertainties associated with socioeconomic assumptions and damage estimates are the main drivers of future inequalities. We investigate under which conditions the cascading effects of these uncertainties can counterbalance the projected convergence of countries’ incomes. We also compare inequality levels across emission pathways and analyze when the effect of climate damages on inequality outweigh that of mitigation costs. We stress the divide between IAM- and econometrics-based damage functions in terms of their effect on inequality. If climate damages are as regressive as the latter suggest, climate mitigation policies are key to limit the rise of future inequalities between countries.