We are getting a much clearer picture of the costs associated with climate change and the benefits of action to combat it.
Economists are increasingly quantifying the risks associated with global warming including 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, ocean acidification, loss of productivity, business disruptions, conflict, and climate refugees.
Worse than we
The costs of climate change may be far greater than predicted by the standard
economic models such as those used by the U.N. International Panel on Climate
Change(IPCC). In June of this year, Lord Stern and his colleague, Dr Simon
Dietz, published research in The Economic Journal,which warns that the financial
damage caused by global warming will be considerably greater than current models
“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
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.
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. 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.
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
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
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.
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.
The IIED study indicates that the 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.
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
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.
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
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
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.
Source: Global Warming is Real
The Cost of Delaying Action to Stem Climate Change
Climate Change: Frequency, Costs and Mortality (World Meteorological Organisation)
Graphics – Cost of Delaying Action to Stem Climate Change
Businesses Feel the Heat from Declining Labor Productivity
Economic Benefits of Combating Climate Change (IIED)
Economic Costs of Combating Climate Change (IPCC)
Reducing Fossil Fuel Use: The Longer We Wait the More it will Cost
Infographic – How Much Would it Cost to Go Green Globally?
Graphic – The Cost of Mitigating Climate Change
The Financial Costs of Biodiversity Loss
Extreme Weather and the Costs of Climate Change
The Costs of Global Warming
The Costs of Climate Change Related Flooding
Graphs – Global Cost of Flooding
The Costs of Flood Damage will Rise Along with Sea Levels
Balken Flooding and the Costs of Climate Change
Tornadoes and Floods Underscore the Costs of Global Warming
Floods in the Philippines Underscore the Deadly Toll from Climate Change
Hurricane Irene and the Staggering Costs of Climate Change
Extreme Weather Makes a Convincing Case for Climate Change