On the way to net zero. But which way?

With an optimal investment – or stranding – choice model in carbon-intensive (brown) capital, which emits greenhouse gases, or in emissions-free (green) capital, we describe the optimal transitions to carbon neutrality that comply with climate constraints such as emission caps for a given date (Fit for 55) or carbon budgets. We show that:

i) Anticipated stranding cannot occur with targets at specific dates.

ii) To limit warming to a given level, explicitly introducing this constraint in the form of a remaining carbon budget minimizes the associated economic cost, leading to high initial stranding with limited budgets. Emission caps set regularly from the first year, and chosen based on emissions from this optimal trajectory, result in a similar path.

iii) Given a cumulative emission level, delaying the transition increases costs and stranding.

iv) Total investment during and after the transition is lower than that in the initial state.

All the codes used are available at Ouvrir dans un nouvel onglethttps://github.com/InseeFrLab/DT-way-to-net-zero