Big Bank Says It’s Going To Cost A Lot To Do Nothing On Global Warming
BY SAMANTHA PAGE AUG 31, 2015 3:08PM
CREDIT: COURTESY CITIBANK
Citibank's second Energy Darvinism report, "ENERGY DARWINISM II Why a Low Carbon Future Doesn’t Have to Cost the Earth," argues that not transitioning to clean energy will be much, much more expensive than taking action.
A new report from Citibank found that acting on climate change by investing in low-carbon energy would save the world $1.8 trillion through 2040, as compared to a business-as-usual scenario. In addition, not acting will cost an additional $44 trillion by 2060 from the “negative effects” of climate change.
The report, titled Energy Darwinism, looked at the predicted cost of energy over the coming decades, the costs of developing low carbon energy sources, and the implications of global energy choices.
“What we’re trying to do is to take an objective view at the economics of this situation and actually look at what the costs of not acting are, if the scientists are right,” Jason Channell, Global Head of Alternative Energy and Cleantech Research at Citi, told CNBC. “There is a cost to not doing this, and although there is a cost to acting, what we’re trying to do is to actually weigh up the different costs here.”
The report includes analysis of the cost of stranded assets — the idea that in order to prevent 2ºC of warming, a third of the world’s oil reserves, half of its gas reserves, and more than 80 percent of its coal reserves need to stay in the ground.
“Overall, we find that the incremental costs of action are limited (and indeed ultimately lead to savings), offer reasonable returns on investment, and should not have too detrimental an effect on global growth,” the report’s authors write. In fact, they found that the necessary investment, such as adding renewable energy sources and improving efficiency, might actually boost the global economy.
“We believe that that solution does exist,” the report states. “The incremental costs of following a low carbon path are in context limited and seem affordable, the ‘return’ on that investment is acceptable and moreover the likely avoided liabilities are enormous. Given that all things being equal cleaner air has to be preferable to pollution, a very strong ‘Why would you not?’ argument begins to develop.”
Indeed, Citibank is not the first organization to call attention to the fact that inaction on climate change comes with a big price tag.
The Obama administration has repeatedly recognized this. A report released earlier this summer by the White House’s Council of Economic Advisers found that the longer the United States waits, the more expensive mitigation will be. In his first speech as the director of the U.S. Office of Management and Budget, Shaun Donovan emphasized the budgetary importance of climate action.
“From where I sit, climate action is a must do; climate inaction is a can’t do; and climate denial scores – and I don’t mean scoring points on the board,” Donovan said. “I mean that it scores in the budget. Climate denial will cost us billions of dollars.”
Climate change has been tied to increased severe weather, such as droughts and floods. This extreme weather can be extremely expensive. Superstorm Sandy, for instance, caused $65 billionin damage.
It’s a common trope that environmental action — whether it’s reducing carbon, protecting water, or curbing smog — costs too much.
The Environmental Protection Agency’s Clean Power Plan, finalized earlier this month, is one example of the false debate between economic benefits and addressing climate change. The EPAestimated that the plan to reduce carbon emissions from power plants by 32 percent will result in $25 to 45 billion in climate and health benefits by 2030.
But several republicans said that the plan would be an economic disaster. “We’ll all be left to suffer while the President scrambles to carve out a legacy for himself, leaving a ruined economy in his wake,” said John Tidwell, director of the Oklahoma chapter of Americans for Prosperity, a Koch-funded action group. Even presidential contenders got in on the action, with Sen. Ted Cruz (R-TX),saying the plan “will cause Americans’ electricity costs to skyrocket at a time when we can least afford it.”
The Citi report was released in advance of December’s meeting of the United Nations Climate Conference on Climate Change in Paris. The conference is “the first real opportunity to reach a legally binding agreement to tackle emissions,” according to the report.
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