Tackling global warming could slow global growth - by 0.06 per cent, IPCC predicts
- 16 Apr 2014, 14:00
- Mat Hope
Economists and policymakers have spent decades
debating how much the world will have to pay to avoid the worst
impacts of climate change, and whether it's worth the cost. A key
finding in the UN's latest big climate report should help move that
debate along: tackling climate change could slow economic growth by
just 0.06 per cent a year, it says.
The Intergovernmental Panel on Climate Change (IPCC) released
the third instalment of its review of latest climate change
research last Sunday. While the first two instalments aimed
to better define the
climate change problem, the third report focuses on potential
solutions - from ramping up wind and solar power, to halting
But governments don't just want to know what they must do to
avoid the worst impacts of climate change, they also want to know
how much it will cost. So the IPCC's latest report spells out the
choice: governments either pay a bit to curb emissions now, or risk
much larger costs in the future.
Or, as IPCC co-chair Ottmar Edenhofer put it during the report's
launch, "Climate policy isn't a free lunch but could be lunch
[that's] worthwhile to buy".
Taking action is relatively cheap
In 1992, countries agreed they would curb emissions to prevent
temperatures rising by more than two
degrees above pre-industrial levels. 22 years on, after
more than two decades of increasing emissions, that goal looks ever
So it may come as a surprise to find that the IPCC says the cost
of keeping the pledge may be relatively low.
The IPCC estimates, over time, the economic impact of
governments implementing climate policy could add up to between
three and 11 per cent of 'global consumption' - an economic unit
similar to GDP. That may sound like a lot at first, but once the
figure is put alongside the cost of doing nothing, it looks less
The IPCC bases its estimates on a future where there
is three per cent annual economic growth. That's by no means
certain - and the
World Bank estimates it's been below this for the last two
years - but it allows the IPCC to make theoretical statements about
how much implementing climate policy could cost.
In order for it to remain "likely" that the two
degrees target can be achieved, the IPCC says governments will have
to implement policies that will cost between 0.04 and 0.14 per cent
of global consumption growth each year. The average cost could be
around 0.06 per cent a year, it says.
That means global economic growth of 2.94 per cent
per year, in contrast to three per cent growth in a fictional
future where there is no climate change (known as a baseline
scenario), according to the IPCC's calculations.
The estimate shows "we do not need to stifle economic growth to
mitigate", Pete Smith, Professor in agriculture and food security
at the University of Aberdeen tells Carbon Brief.
The chart below illustrates the difference. The blue bar shows
how much economic growth the IPCC expects there to be if
governments take action, and the grey bar shows the growth
projected in the baseline scenario:
Source: This chart is based on this
graphic from Climate Nexus.
Limiting warming may also turn out to be cheaper than the IPCC
suggests, because its estimate doesn't include the wider benefits
of implementing such policies.
For instance, cutting emissions could mean improved air quality,
better public health and increased energy security. In many cases,
those benefits could have an economic value greater than the cost
of mitigation. The IPCC says some models struggle to put a value on
such benefits, so it doesn't quantify them in its reports.
So paying the (relatively small) price to act now should be seen
as an investment to avoid the future cost of failing to curb
emission, the IPCC argues.
Working out the economic cost of climate change doesn't stop
there, however. On top of paying a bit to implement climate policy,
the world is going to have to bear the cost of climate change that
is already locked in due to greenhouse gases that have already been
emitted, the IPCC says.
The IPCC's second report - released at the end of March - said
the cost of climate change would be around 0.2 to two per cent of
GDP. That led to a
minor controversy, with some people comparing that figure to
the 3 to 11 per cent of global consumption cost estimate in a
leaked version of the IPCC's report.
argued that, according to the IPCC's own analysis, the cost of
action (the third report's number) outstripped the cost of inaction
(the figure in the last report) to the extent that it may not be
worth rolling out policies to reduce emissions.
But that's not quite right, and the iPCC explicitly cautions
against making that comparison.
The 0.2 to 2 per cent figured refers to the economic damage
caused by around two degrees of warming. The IPCC says that without
"substantial and sustained" emissions cuts the world is already
well on its way to that passing that point, however.
So the world is already locked into paying something approaching
that amount, whether emissions are cut or not. And if emissions are
not cut, costs are going to be higher - possibly much higher.
Cost of inaction
While the IPCC acknowledges that not much is known about the
potential cost of damage beyond a temperature rise of two degrees,
it does estimate that costs will "accelerate" beyond that
Reacting to the report, Stanford University economist Charles
Kolstad tells Carbon Brief one of its main messages is that "no
matter what goal is desired, delaying action will only increase
That's because the risk of triggering abrupt changes in the
climate system - such as rapid sea level rise or widespread
droughts - becomes high above one of two degrees warming.
The problem is, some models can't currently estimate the vast
economic damage of that happening. So while the IPCC expects the
costs of inaction to be far higher than price of implementing
policies, it can't currently put a precise figure on it.
Seen in that context, the cost of acting to tackle climate
change seems like a small price to pay.