People across the world work hard to earn money and are likely to react angrily if anyone, from taxman to thief, tried to take away that cash. From that viewpoint, perhaps the investment and sacrifice needed to avoid dangerous climate change make people question whether or not it’s really happening. But if climate change affects how we live, there will be costs associated with that too. The person who cares about cash above all else might then ask: will it cost me more if I try and stop climate change, or if I do nothing?
The Stern Review Report on the Economics of Climate Change, published in 2006 by the British government, is the highest profile effort to answer questions like this so far. Its verdict: “The benefits of strong, early action considerably outweigh the costs.” Compared to the damage that would be caused if nothing is done to tackle climate change, aiming to stabilise atmospheric CO2 concentrations at 550 parts per million (ppm) would provide benefits that could be valued at $2.5 trillion, and would increase with time. That’s more than the the gross domestic product – the total value of all goods and services produced, abbreviated as GDP – of the United Kingdom in 2009. In 2009, by one measure global GDP was $70 trillion.
In the Copenhagen Accord, the world’s countries agreed to try and limit climate change to 2°C warmer than it was before humans started burning fossil fuels more aggressively, which is considered a comparatively “safe” level. The Stern report points out that even 2-3°C could cause up to 3 percent loss of global GDP compared to what could have been achieved in a world without this level of temperature rise. By contrast, by 2050 it estimates the annual cost of stabilising greenhouse gas concentrations at 500-550ppm CO2 to be around 1 percent of GDP. While a significant figure in itself, this is less than the loss of GDP resulting from higher temperature rises. Currently, the EU believes its target of cutting its CO2 emissions by one-fifth from 1990 levels by 2020 will only cost 0.32% of its GDP.
The Stern report also notes that without action temperature rises this century of 5-6°C are possible. It says that models that include risks of this kind of “abrupt and large-scale climate change estimate an average 5-10 percent loss in global GDP, with poor countries suffering costs in excess of 10 percent of GDP”. Such temperatures are beginning to reach levels where Steven Sherwood from the University of New South Wales, Australia, said earlier this year could be fatal to people. Such limits on humanity’s ability to adapt are not well recognised by economists, Sherwood commented.
Elsewhere in the Stern Report these costs are described as losses in “global per capita consumption”. It predicts that for the world to continue its greenhouse gas emissions growth at a “business-as-usual” level brings “impacts and risks that are equivalent to an average reduction in global per-capita consumption of at least 5 percent, now and forever”. If all possible risks are taken into account, this could increase until our total consumption is cut by one-fifth overall, for all time.
There is a story, told by Aesop, Disney, and many others of a grasshopper who spends the summer making music while ants are busy collecting food for winter. When it comes to winter, the grasshopper comes to the ants for help, only to be rebuked for idleness. On climate change, humanity faces a similar choice to the ants and grasshopper. Nevertheless, there are many people who think like the grasshopper, refusing to make the effort and investment to properly understand and tackle it. The Stern report shows that unless we make like the ants and get to work, we and our descendants will ultimately pay the price we were unwilling to, and probably more. I think we’d better get on with it.