  Stringent climate policy compatible with the targets of the 2015 Paris
Agreement would pose a substantial fiscal challenge. Reducing carbon dioxide
emissions by 95% or more by 2050 would raise 7% (1-17%) of GDP in carbon tax
revenue, half of current, global tax revenue. Revenues are relatively larger in
poorer regions. Subsidies for carbon dioxide sequestration would amount to 6.6%
(0.3-7.1%) of GDP. These numbers are conservative as they were estimated using
models that assume first-best climate policy implementation and ignore the
costs of raising revenue. The fiscal challenge rapidly shrinks if emission
targets are relaxed.
