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| Tallying the cost: our local Fish & Wildlife manager Charlie Vandemoer surveys damage caused by Sandy from a helicopter |
We are getting a much clearer picture of the costs associated
with climate change and the benefits of action to combat it.
While adding up the costs of a warmer world is no easy
feat, economists are increasingly quantifying the risks associated with climate
change.
The price tag associated with global warming includes
the costs associated with extreme weather, declining global food
stocks, degraded ecosystems, the loss of biodiversity, flooding, sea
level rise, droughts, fires, the collapse of the permafrost sink, loss of
productivity, business disruptions, violent conflicts, and climate refugees.
Worse than we know
“It is extremely important to understand the severe limitations of standard economic models, such as those cited in the IPCC report, which have made assumptions that simply do not reflect current knowledge about climate change and its … impacts on the economy,” said Lord Stern.
Extreme weather
As revealed in a 2012 study by insurance giant
Munich released just days before Sandy struck, North America
had already incurred $1.06 trillion in extreme weather damage since 1980. To put this number
in context, that is five times the average loss in prior decades.
As explained in a Ceres report. titled Inaction on climate change: the
cost to taxpayers, in 2013, Federal and state disaster
relief payouts are estimated to have cost every person in the U.S. more than
$300. There have been at least 200 weather-related natural catastrophes
annually in North America in recent years, compared to an average
of around 50 a year in the early 1980s.
Flooding
As reviewed in a Global Warming is Real article,
flooding is one of the leading expenses associated with climate change. It
is already very expensive and the situation is expected to get far
worse. In 2007, the UNFCCC estimated that the annual cost of flooding
excluding storm intensity was about $11 billion. New reports
indicate that the actual costs are likely to be much higher.
A new Bloomberg report titled Risky Business: The Economic Risks of Climate Change in
the United States, indicates that as much as $106
billion worth of existing coastal property in the US will fall below sea level
by 2050. The oceans could engulf as much as $507 billion worth of property by
2100.
A World Bank report indicates
that the cost of flooding in 2005 was $6 billion and that
figure could increase to at least 1 trillion annually by 2050.
According to a PNAS study, storm surges alone could increase
costs from the current level of about $10-40 billion per year to up to
$100,000 billion per year by the end of century.
Benefits
The benefits of combating climate change could amount to
trillions of dollars each year. The International Energy Agency (IEA) says that
transitioning to clean energy alone could save us as
much as $115 trillion in
fuel costs by 2050.
According to a new World Bank report,
policies aimed at cutting carbon would proffer tremendous economic
benefits in terms of new jobs, increased crop productivity and public
health benefits. The study titled, Climate-Smart Development, uses
climate modeling.
The report states that responsible climate policies
(transportation, energy and efficiency) in the EU, Brazil, China, India,
Mexico, and the U.S. could provide annual GDP growth of between $1.8
trillion and $2.6 trillion by 2030.
This would take us almost one third (30 percent) of the way
towards keeping global average temperatures within the internationally
agreed upon upper threshold limit of 2°C (3.6°F). Such policies would
reduce carbon emissions by 8.5 billion metric tons and save nearly 16
billion kilowatt-hours of energy which is the equivalent to taking 2 billion
cars off the road.
According to the IEA report, renewable energy, energy
efficiency and energy storage can stave off climate change and provide
significant economic benefits. The report titled Energy Technology Perspectives indicates
that these measures could generate net savings of $71 trillion” by 2050.
They would also keep global average temperatures within the
internationally agreed upon upper threshold limit of 2°C (3.6°F).
Scientists led by Professor Martin Parry (a former co-chair of
the IPCC) in a 2013 report published by the International Institute for
Environment and Development (IIED) calculated that the benefit of combating
climate change amounts to between $615 to $830 trillion.
This is the finding in the IIED report titled, Assessing the costs of adaptation to climate change: a
review of the UNFCCC and other recent estimates.
It concludes that the costs will be even greater if we factor the full range
of climate impacts.
Costs
Over time the costs reported in studies that quantify climate
change keep increasing. According to a 2008 study released by the UN-backed
Principles for Responsible Investment (PRI) and UNEP Finance Initiative, global
environmental damage caused by human activity in 2008 represented a
monetary value of $ 6.6 trillion, which is equivalent to 11 percent of
global GDP. The UNEP Finance Initiative report titled Putting a Price on Global Environmental Damage estimates
that global costs could rise to $28 trillion by 2050.
According to another estimate, the mean annual impacts
of climate change in 2060 range from about $1.5 trillion to as
large as $20 trillion.
According to the IIED study, the cost of climate
change could go as high as $1240 trillion with no adaptation. With
appropriate adaptation efforts the costs are reduced to about $890
trillion.
Growth
According to the IPCC, keeping temperatures within the
internationally agreed upon upper threshold limit of 2°C (3.6°F) would
have a negligible impact on growth compared to the powerfully destructive
impacts of unchecked climate change.
The third of four IPCC reports released in April
indicated that addressing climate change would have a net effect on growth of
0.06 percent per year. According to the IPCC’s Fourth Assessment
(AR4) in 2007, the cost of stabilizing carbon pollution at 445 ppm CO2-eq
corresponded to “slowing average annual global GDP growth by less than 0.12
percentage points.” This translates to a cost of about one tenth of a
penny for each dollar. However, these assessments of the effects
on economic growth do not factor the economic benefits of avoiding
a climate catastrophe.
The World Bank report suggests that pro-climate policies
could add 1.5 percent to GDP growth.
Climate change cost benefit analysis
A cost benefit analysis convincingly makes the case for
action. A global transition to clean energy would cost $44 trillion but
save $115 trillion in avoided fuel costs, the IEA reports.
Extrapolating from the IIED report, a Think Progress article indicates
that keeping atmospheric carbon below 450 ppm will cost about $410
trillion ($275 trillion with adaptation). So stabilizing at 450 ppm
reduces net present value (NPV) impacts by $615 to $830 trillion. The
abatement NPV cost is only $110 trillion which represents a 6-to-1
savings.
Economists are increasingly able to quantify the risks
of failing to engage climate change and the benefits of acting now. As reviewed
in a New York Times article, even Henry
Paulson, secretary of treasury under George Bush, uses a cost benefit
analysis to call for immediate action on climate change.
According to one estimate, in the last two years alone, delays
in engaging climate change have cost us $8 trillion. A number of
economists have made the point abundantly clear, delaying action on
climate change is far more costly in the long run. One thing is certain, the
longer we wait, the more it will cost.
A plethora of new data puts to rest the claims that the
world cannot afford to act on climate change. It would be more accurate to say
we cannot afford inaction.
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Richard Matthews is a consultant, eco-entrepreneur, green investor
and author of numerous articles on sustainable positioning, eco-economics and
enviro-politics. He is the owner of The Green Market Oracle,
a leading sustainable business site and one of the Web’s most comprehensive
resources on the business of the environment. Find The Green Market on Facebook and follow The Green Market’s twitter
feed.
