Using an integrated assessment model, the research finds that the social cost of carbon (SCC)—a key indicator guiding climate action—may rise with warming at first but then sharply decline once damages exceed a critical threshold. Such a decline would weaken global motivation to deploy renewable energy and could accelerate warming far beyond temperature goals.
Global temperatures are approaching 1.5 °C above pre-industrial levels, with projections indicating a high likelihood of surpassing 2 °C this century. Despite clear scientific warnings, global CO₂ emissions have rebounded following the COVID-19 pandemic due to stimulated consumption, fossil-fuel-locked infrastructure, and slow deployment of renewable energy. Economic inertia, workforce barriers, stranded fossil fuel assets, and inconsistent mitigation policies further hinder progress. Many countries continue to adopt a “wait-and-see” strategy based on the assumption that the SCC—and therefore the incentive for mitigation—will naturally increase as climate damages worsen. Based on these challenges, there is an urgent need to test whether delayed action may instead erode the incentive to mitigate.
A study (DOI:10.48130/een-0025-0012) published in Energy & Environment Nexus on 28 October 2025 by Rong Wang, Fudan University, highlights that waiting for climate damages to intensify before acting may undermine the very incentives needed to reduce fossil fuel use.
The study introduces a modified cost–benefit integrated assessment model designed to optimize long-term choices in consumption, labor, and investment while governing the pace of transition from fossil fuels to renewable energy. Using a CES production function calibrated with historical data, the model incorporates realistic elasticities between energy and nonenergy inputs, varying substitution possibilities between fossil and renewable energy, and empirically grounded learning rates that reflect past declines in renewable energy costs. An empirical climate-damage function further links rising temperatures to economic losses, with parameters aligned to recent evidence and the Paris Agreement’s temperature thresholds. Mitigation is triggered in different years by sharply reducing the pure rate of time preference, and 10,000 Monte Carlo simulations evaluate uncertainties across key factors such as technological progress, climate system response times, and the capacity of backstop technologies. The results reveal that mitigation costs grow steeply at deep decarbonization levels: a 50% reduction in fossil fuel supply lowers GDP by only about 5%–8%, whereas a 90% reduction can reduce GDP by 21%–51%, highlighting stringent technological and geophysical limits. The model also projects substantially higher damages at 2 °C warming—around 20%–50% of global GDP—than classic DICE-type models, better matching empirical assessments. If mitigation begins by 2025, renewable energy could reach roughly 90% of total supply by 2100, holding climate damages near 10% of GDP. In contrast, delaying action until after 2050 results in sluggish renewable deployment, damages nearing 30% of GDP, and a rapid decline in the social cost of carbon—often below USD 1,000/tCO₂—reducing the likelihood of limiting warming to 2 °C to under 10%. Sensitivity tests confirm that this pattern of initially rising but ultimately collapsing mitigation incentives is robust. Moreover, consistently low renewable energy shares once damages exceed about 10% of GDP may signal an approaching socioeconomic tipping point.
The study shows that waiting for rising climate damages will not strengthen mitigation incentives; instead, delaying action can weaken renewable energy adoption and entrench fossil fuel dependence. By revealing how a declining SCC aligns with slowing energy transitions, the research calls for an early-warning mechanism in the Global Stocktake to track climate damages and renewable energy shares. Such monitoring could signal when a socioeconomic tipping point is approaching, enabling timely policy intervention to avoid irreversible temperature overshoot.
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References
DOI
10.48130/een-0025-0012
Original Source URL
https://doi.org/10.48130/een-0025-0012
About Energy & Environment Nexus
Energy & Environment Nexus is a multidisciplinary journal for communicating advances in the science, technology and engineering of energy, environment and their Nexus.