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This research paper by the Stockholm Environment Institute uses the Climate and Regional Economics of Development (CRED) model to analyze the gap between current climate-economic policy recommendations and the emission reductions required to limit global warming to 2°C. The authors argue that conventional models, such as DICE, often underestimate climate damages and ignore international equity and the needs of future generations. By incorporating updated science, lower discount rates, and cross-regional investments from rich to poor countries, the CRED Optimal scenario demonstrates that it is possible to achieve a high probability of staying below 2°C while simultaneously reducing global income inequality.

This research paper introduces the Climate and Regional Economics of Development (CRED) model, an integrated assessment model (IAM) designed to analyze the intersection of climate mitigation and international economic development. The model's primary innovations include a focus on global equity through a concave utility function and the use of McKinsey marginal abatement cost curves to project mitigation costs. The authors argue that achieving climate stabilization requires either a very low discount rate or significant capital transfers from high-income to developing nations.