The Costs of Counteracting Climate Change

Environmentalists have long argued that the costs of doing nothing about climate change would far outweigh the costs of averting it — as one would expect from the degradation of the basic environmental context in which all human activity occurs.  Once the biosphere is ruined, so will we be.  Doing nothing about climate change is like failing to install ventilation in a factory where corrosive vapors accumulate and then wondering why it costs so much in worker sick days, extra healthcare, and replacement equipment.  Climate denialists have always been penny-wise and pound-foolish.

Reuters reported on a recent study showing that “the effects of climate change was [sic] already costing the global economy a potential 1.6 percent of annual output or about $1.2 trillion a year, and this could double to 3.2 percent by 2030 if global temperatures are allowed to rise.”  One commentator, economist Nicholas Stern, observed that if unchecked climate change could eventually result in a 20 percent cut in per-capita consumption.  The report also said that more than 100 million people will die, mostly in the developing world.

The loss of 100 million lives because of conservative ideological intransigence is morally indefensible, and those who continue to deny the reality of global warming are collectively responsible for those deaths, as are governments and businesses who have the power to make effective change but fail to do so.  But for the sake of argument, let’s set that human consideration aside for the moment and do a quick financial cost-benefit analysis.  What follows is a thumbnail estimate of the costs and benefits.  I want to be clear that I’m doing rough estimates only, and I recognize that there are data and analytical problems with measuring global GDP, with twenty year cost projections, and other things.  Nonetheless, we can get a rough idea of how what the costs of rational action are, vs. the costs of irrational inaction.

A major study published in 2012 by Stanford researcher Mark Z. Jacobson and UC-Davis research scientist Mark A. Delucchi showed that the world could shift to a sustainable energy system within 20 years.  (Here’s a link to a summary article on it in Scientific American; the actual study can be found in two parts here and here).  They estimated that it would cost about $100 trillion over 20 years to shift the world to a power system based on wind, solar, and water.  Current Gross World Product is about $79 trillion (measured in terms of purchasing power parity).  According to estimates provided by the CIA Factbook, average global growth for the last ten years (2001-2011) was 3.76 percent, with inflation during the same period of 1.3 percent.  If we make the simplifying assumption that these figures will also be the averages for the next 20 years, the gross world product over that period will be about $2,370 trillion.  That’s a huge amount of productivity — more than two quadrillion dollars.  Yes, quadrillion, not trillion, but that’s over 20 years.  From this two quadrillion dollars of economic production we would devote $100 trillion to sustainable energy conversion, which, although it seems like a lot, is only 4.2 percent of the total. 

Now, since the cost of doing nothing about climate change is as much as 3.2 percent of economic growth over that period, and introducing clean energy systems will help mitigate that cost over time, we should subtract at least part of that from the cost of clean energy.  Let’s take away half, or 1.6 percent. That gives us a rough cost estimate for establishing a sustainable energy system: 2.6 percent of Gross World Product over 20 years.  That doesn’t count the fact that engaging in such a massive infrastructure project would have a powerful stimulus effect on the world’s economy; if we figure that in, the net effect on global economic growth would probably be positive, not negative, and it would be all green: we would save the biosphere and create lots of jobs all at once!  And remember: we would save as many as 100 million human lives to boot!

It would cost us only 2.6 percent of GDP over 20 years to implement clean energy around the entire globe, stopping climate change from eventually destroying civilization.  You wouldn’t even really notice it; even if the cost was double that it wouldn’t be burdensome, compared to doing nothing.  That’s a cost any rational person should be willing to bear.

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