Global impact of a climate treaty if the Human Development Index replaces GDP as a welfare proxy

Abstract

This study explores the implications of shifting the narrative of climate policy evaluation from one of costs/benefits or economic growth to a message of improving social welfare. Focusing on the costs of mitigation and the associated impacts on gross domestic product (GDP) may translate into a widespread concern that a climate agreement will be very costly. This article considers the well-known Human Development Index (HDI) as an alternative criterion for judging the welfare effects of climate policy. We estimate what the maximum possible annual average increase in HDI welfare per tons of CO2 would be within the carbon budget associated with limiting warming to 2°C over the period 2015–2050. Emission pathways are determined by a policy that allows the HDI of poor countries and their emissions to increase under a business-as-usual development path, while countries with a high HDI value (>0.8) have to restrain their emissions to ensure that the global temperature rise does not exceed 2°C. For comparison, the well-known multi-regional RICE model is used to assess GDP growth under the same climate change policy goals.