Comparing economic impacts of net-zero transition with climate damage uncertainties using a dual-model approach

Abstract This study conducts a scenario analysis of global net-zero emissions by 2050 using two macroeconomic models with distinct theoretical foundations: E3ME (non-equilibrium) and GEM-E3 (equilibrium). The analysis quantifies the economic impacts of increasing climate policy ambition to meet the global 1.5 °C warming target and highlights key differences between the models in projecting GDP, employment, and sectoral transitions. The findings indicate that while economic outcomes of decarbonization may vary depending on the model paradigm used, the uncertainties in climate damage projections far exceed those of mitigation costs. By comparing the economic impacts of mitigation with potential losses from climate damages, the study finds that the costs of mitigation are lower and more predictable than the potential climate damage costs. Limiting warming to 1.5 °C yields net economic gains in almost all countries examined, while a 3 °C trajectory could trigger widespread losses. The study reinforces the need for decisive and immediate global mitigation efforts.