Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/336501 
Year of Publication: 
2026
Series/Report no.: 
NBB Working Paper No. 486
Publisher: 
National Bank of Belgium, Brussels
Abstract: 
The Paris Agreement is designed to increase climate ambition gradually through a process of ratcheting up. What is the plausible endpoint of this process? We develop a tractable integrated assessment model in which countries interact through a decentralized general equilibrium and negotiate unanimously over a global carbon budget, with all mitigation implemented via a global carbon price. We prove existence and uniqueness of a unanimous international agreement on global emissions, in which carbon pricing revenues are redistributed across countries in proportion to marginal climate damages. In a quantitative application for 154 countries, the resulting equilibrium limits global mean surface temperature change to 1.51C, at a carbon price of 320 USD/tCO2. The associated international transfers of carbon pricing revenue are progressive toward lower-income countries and amount to about 0.8% of global GDP annually - an order of magnitude larger than the Paris Agreement's climate finance target.
Subjects: 
Paris Agreement
climate policy
international environmental agreement
climate economics
JEL: 
Q54
Q56
Q58
F35
F53
Document Type: 
Working Paper

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