One of the common impressions we have about environmental issues is that there will always be a trade-off between economic growth and protecting the environment. University of Dayton professor Bob Brecha takes a look at new reports about the economics of avoiding climate change.
I’ve been reading some recent reports on the costs of preventing climate change versus the costs of just going on as if there were no threat. The authors of “The New Climate Economy” say there is no conflict between mitigating climate change and having a healthy economy. Although I have my doubts as to how realistic some of the optimistic projections are.
The Global Commission on the Economy and Climate has the goal of helping “governments, businesses and society make better-informed decisions on how to achieve economic prosperity and development while also addressing climate change.” The report’s authors consist of “24 former heads of government and finance ministers, as well as leaders of businesses, cities, international organizations, and research institutions.” An international panel of economists in this area advises them.
How can it be that paying for climate protection will not be a drag on the rest of the economy? There are several ways to see how we can get, if not a free lunch, then at least one that’s pretty cheap. The conclusion is nothing new, and is similar to what the Intergovernmental Panel on Climate Change has been saying for years.
Mitigating climate change means learning how to transform our worldwide energy system from fossil fuels to other sources. We’ve all heard about the increase in the last several years in the number of solar panels and wind turbines being installed, which was helped by roughly $100 billion per year in subsidies by governments around the world. That would seem to contradict the idea of an inexpensive response to climate change. But we just need to look at the actual numbers to get a different picture. According to “The New Climate Economy” study, and the International Energy Agency, worldwide subsidies for fossil fuels are six-times as large, at $600 billion per year. This one example is a good illustration of how to think about climate change mitigation – it is not necessarily true that our economies are working efficiently.
We need to more carefully target how we use financial incentives, redirecting them toward goals we want to achieve, rather than to things we will then have to go back and spend money to remedy later – like damages from climate change caused by fossil fuels.
Even if we leave aside the issue of subsidies, it would be helpful to at least take into account all of the costs of our current energy system. Air pollution in many countries results in a few percent of GDP loss each year – far more than any reputable estimate of the cost of mitigating climate change. A new IMF report tells us that when we take the damages done to health and the climate by fossil fuels into account, the actual subsidies amount to over $5 trillion per year. That’s about 6% of the world’s economic output.
These reports also point out that our society is continuously spending money to build and repair infrastructure such as buildings and transportation systems. With climate change occurring, the prudent step would be to make decisions about how and where to build based on the best scientific knowledge we have as to how the climate will change.
Those opposing environmental regulations have always protested that any deviation from the status quo would lead to economic ruin. Luckily, we can look back at our historical experience that costs were much lower than initially projected.
Bob Brecha is a professor of physics and renewable and clean energy. He is the coordinator of the Sustainability, Energy and The Environment program at the University of Dayton.
