Critics say that President Obama’s plan to address climate change will hurt the middle class and the global economy. But a major new study argues that in fact the opposite is true: The economy could lose at least $44 trillion if the world fails to slow the impact of global warming.
That’s the top note from a report published this month by Citigroup, one of the planet’s largest banking and financial services companies. The 122-page document, which tends to leave policy wonks drenched in admiration, compared two possible futures.
In one scenario, the world rapidly shifts to a mix of low carbon energy, like wind and solar. In the other scenario, the world drifts along like it has for decades, using the atmosphere as an ashtray for carbon.
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To the surprise of the authors, a pedigreed team of 10 financial analysts and economists, the basic costs of the two scenarios come out about the same. The total spent on capital expenses in the do-nothing scenario is calculated at about $192 trillion. The clean energy path comes in about $190 trillion, a savings of nearly $2 trillion.
That data point alone might help make the case for a low carbon future. But the bombshell comes when Citigroup factors in the expected damage to global GDP if the climate is allowed to warm 1.5 degrees Celsius or more above pre-industrial times. We’ve already warmed about 0.9 degrees Celsius, which doesn’t leave much more headroom for change.
At 1.5 degrees of warming, global GDP is expected to fall by $20 trillion. At 2.5 degrees the economic damages is estimated at $44 trillion. And if the world reaches 4.5 degrees of warming, a level some scientists say we’re on pace to reach, the economic carnage would top out at $72 trillion.
“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 Citigroup, told CNBC. “And those are rather alarming numbers.”
They are so alarming, in fact, that the authors believe that the question of action on climate change has fundamentally shifted, from “why act” to “why not act.” And they’re optimistic that the world will reach an agreement on reducing heat-trapping emissions this December.
That’s when officials are set to gather for a United Nations climate summit in Paris, a meeting of possibly historic proportions after 21 years of failed negotiations. It’s “our last hope,” in the words of Fatih Birol, the incoming director of the International Energy Agency. “We are duty-bound to succeed,” France’s President, François Hollande, has added.
But there’s at least one more alarming number embedded in the Citi report, one that makes it hard to be optimistic about a deal in Paris. It involves “global warming’s terrifying new math,” as Bill McKibben has put it. The math, built on the work of the Carbon Tracker Initiative, comes down to three figures: 2 degrees Celsius, 565 gigatons, and 2,795 gigatons.
The first figure is the rise in global temperature that scientists consider to be safe. The second is the amount of carbon humans can pour into the atmosphere by mid-century and still have some reasonable hope of staying below two degrees. The third, most frighteningly, is the amount of carbon already in reserves around the world—the amount we are, in effect, planning to burn.
The key point, as Citigroup points out, is that we already have about three times the reserves we can safely burn. But the bank also puts a big fat round figure on those reserves: $100 trillion.
In Paris in less than 100 days, the world somehow has to agree to leave that money in the ground.