The Great Carbon Arbitrage

We measure the gains from phasing out coal as the social cost of carbon times the quantity of avoided emissions. By comparing the present value of avoided carbon emissions to the present value of the costs of ending coal plus the costs of replacing it with renewable energy, our baseline estimate is that the world could realize a net total gain of 77.89 trillion US dollars. This represents around 1.19% of current world GDP every year until 2100. We argue that policies and institutions should be construed to reap these large net benefits.