Summary of Recent Reports on the Costs of Climate Action/Inaction

Reports are coming in that make it hard to ignore the economic benefits of action on climate change. This includes recent reports from Citi the world's third largest bank and the London School of Economics, one of the most prestigious and respected schools in the world.

In April 2015 the World Health Organization (WHO) and the US Department of Energy published reports that demonstrate just how high the costs of inaction could be.

An LSE Cost Benefit Analysis Supports Climate Action

Research from the London School of Economics (LSE) makes the economic case for acting on climate change. This study along with many others (see related posts below) make the point that the costs of inaction on global warming are far greater than the costs of acting. This is in addition to the costs directly related to the damage caused by climate change.

Much has been said about the costs of combating global warming but a slew of independent research indicates that the benefits of climate action far outweigh the costs. This was also the conclusion of Citibank study published in August.

Two research institutes at the London School of Economics found that there are significant economic gains from limiting emissions. The LSE study published in July says that improved air quality, energy efficiency and energy security combine with falling renewable energy prices to make climate action the more economically compelling option.

Acting on Climate Change Makes Good Economic Sense According to Citibank

A recent Citibank report showed that if we act to slow climate change we could save as much as $50 trillion. This finding is significant because cost is one of the most common reasons put forth to avoid acting on climate change. The Citi report is but the most recent study to soundly refute the contention that acting on climate change is too expensive. Research shows that climate action offers excellent ROI not to mention saving trillions of dollars of additional costs associated with the damaging affects of a warmer world.

In a report entitled, "Energy Darwinism II: Why a Low Carbon Future Doesn’t Have to Cost the Earth," Citi Global Perspectives & Solutions (GPS), conducted a cost benefit analysis of a low carbon energy economy. The research explored the costs of inaction (business as usual) versus the costs of acting (transitioning to a low-carbon energy economy).

Graphics - Cost of Delaying Action to Stem Climate Change

The Cost of Delaying Action to Stem Climate Change

In July, the White House released a report that quantifies the cost of inaction on climate change. The 33-page report titled "The Cost of Delaying Action to Stem Climate Change," was produced by The Council of Economic Advisers. It makes the point that failure to act on climate change comes with a huge price tag for the American economy (at least $150 billion per year).

Increasing temperatures and rising sea levels demand that we act now if we are to minimize the huge expense associated with a warming world. As the White House explains in the introduction to the report:

"The scientific consensus is that these changes, and many others, are largely consequences of anthropogenic emissions of greenhouse gases that have led to a warming of the atmosphere and oceans."

Climate Change: Frequency, Costs and Mortality (World Meteorological Organisation)

Climate change is not some distant event in the future it is affecting us today. This is the finding in a new report from the World Meteorological Organisation, titled Atlas of Mortality and Economic Losses from Weather, Climate and Water Extremes (1970 - 2012). Because of the increasing risks climate change, the world is currently five times as prone to flooding and extreme weather events as it was in the 1970s.

Increasing Frequency

The first decade of the 21st century saw 3,496 natural disasters from floods, storms, droughts and heat waves. That was nearly five times as many disasters as the 743 catastrophes reported during the 1970s – and all of those weather events are influenced by climate change.

Businesses Feel the Heat from Declining Labor Productivity

There have been several studies that show how a warming planet will decrease labor productivity. Diminished productivity has negative economic implications both for individual companies and the economy as a whole.

A National Oceanic and Atmospheric Administration (NOAA) study warned that climate change is likely to have a significant negative impact on productivity for the US workforce as a whole.

Acting on Climate Change: A Cost Benefit Analysis

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.

Economic Benefits of Combating Climate Change (IIED)

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 $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 of costs will be even greater if we factor the full range of climate impacts. According to the study these costs could go as high as $1240 trillion with no adaptation. However, with appropriate adaptation efforts the costs are about $890 trillion.

Related Articles
Action on Climate Change a Cost Benefit Analysis
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 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
Extreme Weather
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

Economic Costs of Combating Climate Change (IPCC)

According to the third U.N. Intergovernmental Panel on Climate Change (IPCC) report, 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. This cost to economic growth does not factor the economic benefits of avoiding climate catastrophe.

Infographic - How Much Would it Cost to Go Green Globally?

Graphic - The Cost of Mitigating Climate Change

Why Oil Prices Matter for Renewable Energy

The long-term prospects of solar, wind and other clean sources of energy are tied to the cost of fossil fuels. The artificially low price of oil makes it harder for renewable sources of energy to compete. Subsidies drive down the price of petrochemicals, but the true costs are not reflected in crude oil prices.

Investors are also driving up prices. Not too long ago oil was a commodity that traded principally on the actual or the anticipated forces of supply and demand. However, new strategies are increasingly driving investments in petrochemicals which are designed to cash in on the economic recovery. (The simple logic being that coming out of recession the demand for oil will increase as the economy improves.)