The role of the IPCC in assessing actionable evidence for climate policymaking

Following the Paris and Glasgow Agreements, policymakers face a decisive decade in which achieving global emissions targets depends on implementing effective climate policies that mobilize business and society. The IPCC has a strong record informing policymakers on climate science (WGI), adaptation (WGII), and mitigation (WGIII). Yet, media and policy attention has been greatest for WGI and the 1.5 °C special report, with WGIII’s mitigation contribution receiving less attention and being cited less in policy documents. Policymakers often use IPCC reports to justify climate action but not to formulate policy frameworks. The authors investigate why WGIII has lower relative impact, assessing whether its outputs offer actionable insights for justifying, structuring, and achieving policy action. The challenge is tied to the IPCC’s stance of being policy-relevant but not policy-prescriptive and to its scenario generation process (more than 2,000 scenarios submitted for AR6; 1,202 with sufficient information). From these, five Illustrative Mitigation Pathways (IMPs) were selected, but the IPCC does not specify concrete policy instruments or measures that would achieve them. AR6 notes models implement climate constraints by iterating carbon prices or adopting carbon budgets; a “no-climate policy” scenario implies a zero carbon price; and “cost-effective” scenarios assume globally uniform policies. The only reported policy instrument in the IMPs is the carbon price. This framing risks an implicit prescription that a single global carbon price suffices to decarbonize (with economic costs), while deviations are deemed inefficient. Real-world feasibility of global coordination is limited, non-pricing instruments have been pivotal for technology deployment (e.g., contracts for difference, PPAs, feed-in tariffs), and key policy design issues (trade, competitiveness, inequality, financial risk, debt sustainability) are not well covered in the IPCC modelling analysis. The paper explores how WGIII could move from explaining why to act toward how to act without compromising neutrality.

The historical context traces the IPCC’s evolution since its 1988 founding and the UNFCCC framework established in 1992. Early assessments (AR1) lacked detailed economic and technological assessments; AR2 emphasized whole-economy cost-benefit analysis; AR3 introduced scenarios and sectoral analyses; AR4 deepened sectoral chapters; AR5 added risk, uncertainty, ethics, equity, and sustainable development; and AR6 further integrated institutional change, short-term mitigation, innovation, finance, and accelerating transitions. The dominant economic foundation underpinning many models in IPCC scenario exercises is standard neoclassical theory with optimization and representative-agent assumptions that are prescriptive rather than descriptive. Emissions are framed as externalities, leading to a theoretical optimality of carbon pricing (via the Tinbergen Rule), though empirical evidence questions pricing alone as sufficient. The literature shows mixed ex post evidence on carbon taxes and emissions trading and highlights effectiveness of targeted technology support (e.g., contracts for difference, feed-in tariffs, PPAs) in scaling renewables and EVs. The emergence of climate-related financial risk analysis (e.g., TCFD, NGFS) generated demand for scenarios assessing physical and transition risks; however, most IPCC-oriented models have not been updated to capture systemic financial risk, leaving many financial questions inadequately addressed. Alternative modelling traditions—evolutionary and complexity economics, demand-driven macroeconomics, and agent-based approaches—offer richer representations of innovation, diffusion, investment, finance, and behavioural responses, potentially yielding more actionable policy insights.

The qualitative review draws primarily on IPCC Assessment and Special Reports and the broader literature on policymaking and large-scale modelling. The modelling framework described in Methods is the E3ME-FTT system. E3ME is a demand-driven macro-econometric model estimating behavioural relationships from historical time-series; it avoids equilibrium and utility-maximization assumptions, treats output as demand-determined below capacity even in the long run, and allows investment to be financed via debt without automatic crowding out. Labour market outcomes are derived from labour demand-supply balances. The model covers 70 world regions and 44 sectors each. The FTT (Future Technology Transformation) family models technology diffusion using bounded rationality from the investor perspective, reproducing S-curve adoption across power generation, personal transport, household heating, and steel, and includes an asset-level representation for oil and gas. The framework enables analysis of a wide range of policy instruments, notably non-pricing measures, and multiple outcome metrics. Data are available on request; E3ME code is available from Cambridge Econometrics. For illustration in the paper’s results, the authors simulate a portfolio of granular policies aiming for a 1.5 °C-consistent pathway, including ambitious efficiency mandates; nationally set carbon prices rising linearly to 250 USD/tCO2 (real) by 2050; feed-in tariffs and subsidies for renewables with a ban on new coal power; EV subsidies, higher fuel taxes, and phase-out of inefficient vehicles; incentives to electrify heating; public procurement to seed early markets; biofuel mandates for hard-to-electrify transport; and decarbonization mandates for state-owned enterprises in East and Southeast Asia. The scenario assumes immediate implementation, a broadly linear decline of CO2 to net-zero by 2055, and fiscal neutrality via adjusting income and labour taxes to balance net carbon-tax revenues, public investment outlays, and lost fossil-fuel royalties. Results are evaluated against a baseline with no additional post-2022 policy strengthening.

- IPCC WGIII’s scenario process, while claiming policy neutrality, implicitly privileges carbon pricing: models implement climate constraints via carbon prices or budgets, and the IMPs report carbon price as the policy lever, without specifying implementable policy packages. - AR6 scenarios: >2,000 submitted; 1,202 with sufficient information for warming assessment; 5 Illustrative Mitigation Pathways selected. The reliance on a shadow carbon price presumes a stable relationship between pricing and emissions and crowds out analysis of granular policy instruments. - Empirical and policy evidence indicates non-pricing instruments (e.g., contracts for difference, PPAs, feed-in tariffs) have been central to cost reductions and scaling of solar, wind, and EVs, while carbon pricing alone has mixed ex post performance and limited impact in some markets (e.g., vehicle adoption) and can be undermined by waterbed effects in ETSs. - Illustrative E3ME-FTT policy portfolio findings: • Macro: An immediate global GDP stimulus emerges from rapid low‑carbon investment (often debt-financed), with effects strongest in near term and diminishing as debts are repaid and stimulus wanes; employment effects mirror GDP with lags. • Distribution: By 2030, 50 of 61 model regions experience positive GDP impacts in the 1.5 °C scenario (31 by 2050); within-country effects on low-income quintiles vary across European examples. • Structural change: Large output losses are concentrated in fossil energy sectors (coal, oil, gas), while construction and mechanical engineering expand during investment phases; most other sectors see modest gains. Energy‑intensive manufacturing faces both opportunities (supplying materials) and headwinds (higher costs). • Policy interactions: Some regulations have an effectively infinite carbon-price equivalent and cannot be substituted by pricing; different policies are needed across innovation stages; combinations of early regulation and subsidies can synergistically accelerate transitions (e.g., faster EV decarbonization), while carbon pricing alone has little to no effect in vehicle markets. • Policy design metrics: The framework provides outputs on GDP, employment, sectoral dynamics, and distribution—metrics often prioritized by policymakers but absent from the IPCC scenario exercise. - The analysis underscores that focusing on normative efficiency (pricing externalities) is not equivalent to ensuring effective emissions reductions; actionable insights require modelling behavioural responses, innovation-diffusion dynamics, finance, and heterogeneous policy mixes.

The paper argues that IPCC WGIII stands at a crossroads if it is to become solution-oriented while maintaining political neutrality. Four structural hindrances limit policy relevance: (1) an implicitly prescriptive stance favouring carbon pricing under the banner of being non-prescriptive; (2) a focus on standardized narratives rather than diverse, emergent policy needs; (3) evolving policymaker needs that diverge from IPCC scenarios, risking perceptions of impracticality; and (4) a discrete, slow reporting cycle ill-suited to the pace of policy analysis. To bridge the gap between agenda-setting and policy design, the IPCC should assemble evidence on real-world policy instruments (e.g., subsidy design, market creation, regulations, removal of fossil-fuel subsidies, as well as carbon taxes and ETSs), embrace methodological plurality (evolutionary, complexity, demand-driven, and agent-based models that integrate innovation, diffusion, finance, and behavioural aspects), and expand outputs to include policy-relevant metrics (employment, distributional impacts, sectoral shifts, financial risks). A cross-disciplinary special report on real-world policy options could signal a shift toward supporting practical policy design, catalyzing development and uptake of diversified modelling tools, and aligning with capacity-building needs highlighted by finance ministers and other ministries worldwide.

WGIII’s current scenario process provides limited actionable guidance for climate policy design due to its implicit privileging of carbon pricing and lack of granular policy analysis. The authors demonstrate, via the E3ME-FTT framework, how modelling can incorporate realistic policy portfolios and yield decision-relevant metrics on macroeconomic outcomes, employment, sectoral dynamics, distribution, and policy interactions. They conclude that IPCC mitigation work urgently needs reform: adopt economic and methodological plurality; analyse heterogeneous, real-world policy mixes alongside pricing; address finance and systemic risk; and accelerate reporting cadence. A cross-disciplinary special report focused on implementable policy options could signal this reorientation and stimulate broader tool development to meet policymakers’ needs.

The illustrative modelling has notable constraints: E3ME-FTT does not explicitly represent many financial market drivers (e.g., country risk, net international investment positions, currency effects) and would benefit from an explicit financial sector; it currently lacks an explicit representation of occupational mobility and worker reallocation frictions for Just Transition analysis; scenario results assume immediate policy implementation, which is uncertain; and the reported E3ME scenarios in AR6 were excluded from climate assessment due to limited reporting of non-CO2 emissions. More generally, a single model cannot span all policy instruments and risks; a diverse ensemble is required.