Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Climate inaction costlier than net zero transition - economists

Economic IndicatorsOct 25, 2021 08:20
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Environmental activists march to the U.S. Capitol during the final day of weeklong climate change protests in Washington, U.S., October 15, 2021. REUTERS/Evelyn Hockstein

By Swathi Nair

BENGALURU (Reuters) - Hitting the Paris Agreement goal of net-zero carbon emissions will require investments in a green transition worth 2%-3% of world output each year until 2050, far less than the economic cost of inaction, according to a Reuters poll of climate economists.

Respondents also said such a transition depended on the rich world fulfilling promises to help developing economies, and on measures to set a global carbon price of at least $100 - well above the level reached in most current schemes.

Reuters polled economists in Europe, Asia and the Americas ahead of the Oct. 31-Nov. 12 UN talks in Glasgow, widely seen as the world's last chance to limit global temperature rises to "well below" 2 degrees Celsius and ideally to 1.5C.

The survey, the first of its kind by Reuters, highlighted the daunting fiscal challenge ahead for governments which since January 2020 have spent a total of $10.8 trillion - or 10.2% of global output - in response to the COVID-19 pandemic.

Asked whether they thought the COP26 talks in Glasgow would help reach Paris Agreement goals, the pessimists outweighed optimists by nearly three to one, with 32 of 44 respondents saying they were pessimistic on that score.

While the Sept. 16-Oct. 20 poll also revealed differences among top forecasters over how to measure the economic stakes of climate change and decarbonisation, it showed a strong consensus of views around the benefit of early and coordinated action.

"If we delay acting on climate change, the higher that cost to reach net zero emission by 2050 goes," said Charles Kolstad, professor of economics at Stanford University.

"Clearly developing countries cannot be expected to pay for mitigation while they are investing in development and helping their poorest citizens. Insisting on their paying will not accomplish anything."

The relatively narrow 2%-3% of global GDP range per year favoured by the bulk of respondents to reach net zero emissions is somewhat higher than estimates cited by other bodies.

The International Monetary Fund this month cited estimates that net zero by 2050 would mean extra investments of 0.6%-1% of annual global GDP over the next two decades amounting to a cumulative $12 trillion-$20 trillion.

In the Reuters poll, there was substantial divergence in the scale of dollar estimates for the cumulative investment needed, reflecting the differing methodologies used by economists. The median view provided was $44 trillion.

James Nixon, head of climate change macroeconomics at Oxford Economics, put the cumulative amount of investments needed in the energy and other sectors at almost $140 trillion by 2050, the highest estimate obtained in the survey.

"While mitigation may be expensive and potentially politically painful, I think it's incumbent on economists to show that not doing anything is even more expensive," he said.

A "business-as-usual" trajectory leading to temperature rises of 1.6C, 2.4C and 4.4C by 2030, 2050 and 2100 respectively would result in 2.4% lost output by 2030, 10% by 2050 and 18% by 2100, according to the median replies to the survey.

Graphic: Reuters poll graphic on the global economic cost of climate change, https://fingfx.thomsonreuters.com/gfx/polling/lbpgnoynyvq/Final%20main%20graphic.PNG

In contrast, if countries can jointly limit the temperature rise to 1.4C by the end of the century, the loss to global output would be reduced to 2.0% by 2030, 2.3% by 2050 and 2.5% by 2100, they forecast.

By comparison, the shutdowns of economic activity caused by COVID-19 shrunk the world economy by 4.3% last year, according to the World Bank.

"The economic impact of COVID has been significant but temporary. The GDP impacts of climate, however, are permanent, long-term and grow larger with each year of inaction," said Claire Ibrahim, a director at Deloitte Access Economics.

The goal of the COP26 talks is to get world capitals to double down on commitments to reach net-zero emissions and spell out exactly what tools they intend to use and over what timeframe.

COP26 host Britain has reaffirmed that developing countries in particular need support, and it has called on the rich world to deliver on a promise to raise at least $100 billion every year for a green climate fund to support them.

Graphic: Reuters poll graphic on economists' views on COP26, https://fingfx.thomsonreuters.com/gfx/polling/gkvlgxkwgpb/Extra%20question%20graphic%20on%20CC.png

In the Reuters survey, 18 of 31 economists who responded to a question on burden-sharing said that fund should be a priority.

Seven said policymakers should set a collective financial goal with multilateral financial institutions such as the International Monetary Fund (IMF) and World Bank, and two said developed countries owed financial compensation to those who have suffered or are vulnerable to the impact of climate change.

Among other tools available to combat rising emissions, there was strong support for tougher carbon pricing, with national schemes currently only covering around 20% of global emissions and with prices as low as $1 per tonne of CO2.

The median recommendation of the 28 economists who replied was for a price of at least $100 per tonne to incentivise net zero emissions by 2050 - higher than an IMF recommendation of $75 by 2030 but lower than Sweden's $137 a tonne.

While the survey drew complete answers to all questions from numerous prominent climate economists, others were dismissive of such attempts at quantification, showcasing the continuing dilemma among climate economists on the subject.

"Climate change is something that breaks the economists' toolbox," said Eric Neumayer, Professor of Environment and Development at the London School of Economics.

"It's economists' hubris to say all the damage is going to be X percent of GDP. The cost of reducing emissions is Y percent of GDP and hence you should reduce emissions by a certain amount. As economists, we should listen to the scientists who tell us about the devastating impact of climate change."

(Polling by Swathi Nair, Prerana Bhat, Hari Kishan and Mumal Rathore; Editing by Mark John, Ross Finley and Hugh Lawson)

Climate inaction costlier than net zero transition - economists
 

Related Articles

China Factory Inflation Slows Down From 26-Year High
China Factory Inflation Slows Down From 26-Year High By Investing.com - Dec 09, 2021

By Doris Yu Investing.com – China’s factory inflation slowed down slightly in November from a 26-year high, helped by a government crackdown on runaway commodity prices and an...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Sugar Man
Sugar Man Oct 25, 2021 9:25
Saved. See Saved Items.
This comment has already been saved in your Saved Items
To be honest nobody listens to anything you say because you never offer any solutions only alarmism. "Bringing awareness" might get some likes on Twitter but in reality you're contributing net zero
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email