Every major independent analysis of aggressive climate action has found it has very low cost, virtually no impact on growth, and several valuable co-benefits. And one more thing — it avoids climate impacts so catastrophic their costs are almost incalculable, a staggering $1240 trillion, by one analysis.
Two new studies further underscore these points, as Nobel prize-winning economist Paul Krugman explains in his latest New York Times column:
I’ve just been reading two new reports on the economics of fighting climate change: a big study by a blue-ribbon international group, the New Climate Economy Project, and a working paper from the International Monetary Fund. Both claim that strong measures to limit carbon emissions would have hardly any negative effect on economic growth, and might actually lead to faster growth. This may sound too good to be true, but it isn’t. These are serious, careful analyses.
We have known that climate action is super cheap for a long time. I first reviewed the literature back in my 2009 post, “Introduction to climate economics: Why even strong climate action has such a low total cost.” The key finding is that it has “a cost of one tenth of a penny on the dollar — not counting co-benefits.”
Just this April, the U.N. Intergovernmental Panel on Climate Change (IPCC) issued its big report on mitigation that again reviewed the literature. It found that the cost to achieve the low emission 2°C (3.6°F) pathway needed to preserve a livable climate is to reduce the median annual growth of consumption over this century by a mere 0.06%. And that’s “relative to annualized consumption growth in the baseline that is between 1.6% and 3% per year.”
That means annual growth of, say 2.24% rather than 2.30% to save billions and billions of people from needless suffering for decades if not centuries. As always, the report was signed off on by every major government in the world line-by-line. And this does not include the full accounting of co-benefits.
As Krugman explains:
On the other side, it turns out that putting a price on carbon would have large “co-benefits” — positive effects over and above the reduction in climate risks — and that these benefits would come fairly quickly. The most important of these co-benefits, according to the I.M.F. paper, would involve public health: burning coal causes many respiratory ailments, which drive up medical costs and reduce productivity.
The IMF notes that because the co-benefits vary by country — “they are relatively high in China and Poland — where most of the CO2 reduction would come from less reliance on coal and there is high population” — different countries have different optimal CO2 prices:
And the International Energy Agency (IEA) explained this year that the optimal strategy to reduce carbon pollution is centered around the most abundant and cost-effective clean energy resource — energy efficiency. Such a strategy pays for itself, since “the $44 trillion additional investment needed to decarbonise the energy system in line with the [2°C scenario] by 2050 is more than offset by over $115 trillion in fuel savings -– resulting in net savings of $71 trillion.”
One final point. Krugman notes that these new studies undercut both the the conservative’s “Koch-fueled insistence that emission limits would kill economic growth,” as well as the far rarer “anti-growth environmentalism” on the left. I think that some (though maybe not all) of the argument on growth between some on the left and mainstream economists has to do with different definitions of the word “growth.”
Calculating narrow economic growth is only one aspect of a full analysis of sustainable growth. It is quite straightforward to argue that since we don’t have sustainable growth — we don’t really have growth, certainly not the kind of growth that matters to our children and grandchildren and countless future generations encompassing billions and billions of people. The global economy is a Ponzi scheme, as I’ve said. “We have not generated real wealth, and we are destroying a livable climate … Real wealth is something you can pass on in a way that others can enjoy.”
So I would go one step further than Krugman. It’s not just that aggressive climate action “might actually lead to faster growth.” It is the only strategy that could lead to any genuine (sustainable) growth at all.