India and China’s opposition to the commitment to “phasing out” coal in the Glasgow Climate Pact (COP26) made a previously strong agreement much weaker. And while it no doubt caused disappointment and anger among other delegates (the conference’s president even fighting back tears), it also highlighted an issue in climate economics. Part of why politicians are reluctant to do anything about climate change is the fear that it would hurt economic growth.
But what if we thought about this a different way? What if not fixing climate change would be more disastrous to the economy?
To understand how climate change could hurt the global economy, we first have to understand what’s in store for us if climate change is left unchecked. I will use the US economy for reference, with data from the NRDC’s “The Cost of Climate Change” report.
Warmer seas will result in stronger, more destructive storms, causing destructive floods that would destroy infrastructure. The estimated cost to the US economy is estimated to be upwards of $400 billion.
The flipside of this - less rainfall to many parts of the US - will mean many parts of the country will be left without a reliable water source. Providing water to these parts of the country will cost almost $1 trillion. Rising temperatures will cause demand for energy to skyrocket, requiring investments of hundreds of billions of US Dollars in new power plants.
These few impacts alone will cost the US economy more than $1 trillion, but estimates say the US economy could lose up to 4% of GDP annually, meaning the cumulative cost could be in the tens of trillions.
With this shocking revelation, let’s now look at the cost of avoiding all this.
It’s hard to tell exactly how much dealing with climate change would cost, mostly because it’s not a clear goal. What does it mean? Decarbonising? What about all the waste we produce? Or the large scale deforestation of rainforests?
The obvious first step would be to begin generating all our electricity from renewable sources. This would require investments of between $8 trillion and $13 trillion. The next step would be to transition all the things we use fossil fuels for, to electricity. This would include cars, indoor heating, cooking, manufacturing, and would presumably require billions of dollars of investments.
In the long term, such policies would create millions of new jobs to replace the ones lost to decarbonisation. The innovation spurred by decarbonisation could accelerate economic growth, this time without jeopardising the planet’s future. But in a society where short-termism prevails, implementing such policies is difficult.
The figures used in this article are highly speculative, and I only use the US economy for reference, but the goal of this article was to challenge you to rethink the conversations we have about decarbonising. Reducing global emissions is going to be a hard and painful journey, but not doing anything may be more painful - both to our economy and to the planet.