Climate change could cost the global economy $23 trillion by 2050

For decades, we’ve known that transitioning from fossil fuels to a low-carbon economy is critical to the health of our planet and future generations. It is almost impossible to overstate what is at stake if the world continues to burn fossil fuels at a continuous or increasing rate. Experts say that in a business as usual scenario, ecological and economic devastation is not just a threat, but a foregone conclusion. So why has the clean energy transition been so slow, piecemeal and controversial? A big part of the problem is the sheer momentum of the status quo. The world is already operating on a carbon-based economy, and overturning this entrenched system will cost enormous amounts of time, effort and investment. Indeed, the initial price of overhauling and reshaping the global energy sector and all its associated carbon-based supply chains is daunting to say the least, especially for developing countries. However, it is a mistake to think that the clean energy transition will be a costly and overall expensive undertaking. In fact, it is the only plan that makes economic sense in the medium or long term.

A brand new empirically based report from the University of Oxford finds that switching from fossil fuels to renewables could save the world a staggering US$12 trillion by 2050 alone. given the devastating negative externalities of climate change, but that amount has grown more and more as the cost of renewable energy technologies has continued to fall.

The cost of solar energy alone has dropped by 80% since 2010and renewable energy as a whole was the cheapest source of energy in the world in 2020. In fact, renewables have consistently come down in cost faster than experts predicted, making the renewables revolution even cheaper than expected. While renewables have not been spared the price spikes and supply chain hiccups that have characterized the energy sector this year, they are also far from the worst culprits and have, in many cases, been a fail-safe for energy security amid the crisis fueled by Putin’s war in Ukraine. In fact, in the the context of Europe’s energy crisis, “new renewable energy sources, based on off-market contracts, offer electricity at less than a quarter of current and forecast wholesale electricity prices”.

“Even if you are a climate denier, you should agree with what we are advocating,” Professor Doyne Farmer of the Institute for New Economic Thinking at Oxford Martin School told BBC News. Going forward, clean energy will continue to be the cheapest option whether or not you factor in environmental externalities. But when you factor them in, oh my, it’s a given. Insurance giant Swiss Re calculates that climate change could cost the global economy 23 trillion US dollars in 2050. A April Analysis by the United States Office of Management and Budget calculated that climate change could cost the United States $2 trillion a year alone by the end of the century.

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The report also found that the federal government “could spend an additional $25 billion to $128 billion each year on areas such as coastal disaster relief, flood insurance and crop insurance.” This week, in fact, the Biden administration promised that the feds would cover 100% cleaning fee in Puerto Rico after Hurricane Fiona hit the US island territory. It’s right on the heels of the 12 billion dollars already granted – the largest single investment ever granted by FEMA – to Puerto Rico to rebuild a more resilient energy infrastructure in the wake of Hurricane Maria, which wiped out the island’s grid exactly five years ago.

These types of climate-induced crises will only become more frequent, more powerful and more costly. For every additional ton of carbon dioxide equivalent emitted into the atmosphere, the higher the price to pay for delaying the transition to clean energy. The Oxford report empirically underscores the fact that not only is decarbonization an economic imperative, but the faster we do it, the more money we will save. The models are clear: time is running out.

By Haley Zaremba for Oilprice.com

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