Can the Paris Deal Boost SDGs Achievement? An Assessment of Climate Mitigation Co-Benefits or Side-Effects on Poverty and Inequality

Abstract

Abstract The paper investigates potential synergies and trade-offs between emission reduction policies and sustainable development objectives. Specifically, it provides an ex-ante assessment that the impacts of the Nationally Determined Contributions (NDCs), submitted under the Paris Agreement, will have on the Sustainable Development Goals (SDGs) of poverty eradication (SDG1) and reduced income inequality (SDG10). Through this research we aim at answering the following questions: does mitigation policy always imply a trade-off with development objectives? If this is the case, what is the magnitude of the effect of the new international climate architecture on poverty and inequality? By combining an empirical analysis with a modelling exercise, the paper estimates the future trends of poverty prevalence and inequality across countries in a reference scenario and under a climate mitigation policy with alternative revenue recycling schemes. Our study finds that a full implementation of the emission reduction contributions, stated in the NDCs, is projected to slow down the effort to reduce poverty by 2030 (+4.2% of the population below the poverty line compared to the baseline scenario), especially in countries that have proposed relatively more stringent mitigation targets and suffer higher policy costs. Conversely, the impact of climate policy on inequality shows opposite sign but remains very limited. If financial support for mitigation action in developing countries is provided through an international climate fund, the prevalence of poverty will be slightly reduced at the aggregate level, but the country-specific effect depends on the relative size of funds flowing to beneficiary countries and on their economic structure. The output of our analysis contributes to the emerging literature on the linkages between climate change policy and sustainable development, although we capture only partially the complex system of interrelations and feedbacks proper of the SDGs. Moreover, due to its policy relevance, it further enriches the debate on the implementation of the Paris Agreement and its climate finance tools.