In just over a month, world leaders will gather in Glasgow, Scotland, for the 26th United Nations conference on climate change. And while they will bring with them a great deal of ambitious rhetoric and aspirational statements, in the end, the decisions they make will revolve around a much more basic cost-benefit analysis of what is best for their respective countries. But as a couple of recent developments have shown, the math around the costs and benefits of climate action has changed substantially.
The costs of not doing enough have now been shown to be higher than is believed. The European Central Bank has just published the results of its first economy-wide climate stress test, one that fed data from 2.3 million businesses and 1,600 banks in three different scenarios. In the former, where immediate steps are taken to keep warming 1.5 C above pre-industrial levels, some short-term costs are borne primarily by energy-intensive industries and companies.
But in the second scenario, a so-called “messy” transition, and especially in the third, where nothing is done to address climate change, the economic costs are much higher. “An orderly transition would limit the economic losses from the transition risk to around (four percent) of GDP by the end of the century. In contrast, failure to take the necessary measures (ie a greenhouse world) would lead to a physical risk impact of around 25 (percent) of GDP by 2100. “
However, it is the benefits side of the equation that can really move the needle at COP26.
According to a new worksheet From the Institute for New Economic Thought at the University of Oxford, the transition to a low-carbon economy could save the world a whopping $ 26 trillion. “The belief that the transition to green energy will be costly has been one of the main drivers of the ineffective response to climate change for the past 40 years,” write the article’s authors. “This pessimism is at odds with past trends of improving technology costs and runs the risk of locking humanity into an expensive and dangerous energy future.”
While the inflation-adjusted cost of fossil fuels is roughly where it was in the late 1800s, and nuclear power is actually more expensive than it was in the 1950s and 1960s, renewables continue to fall by orders of magnitude. This is the result of something called “Moore’s law,” which was originally used to describe the way that computer chips increased in power and decreased in cost, a phenomenon that underpins much of our modern existence.
It turns out that the same thing is happening with many renewable energy technologies. “We can confidently say that the further we make the transition to solar, wind, battery, hydrogen electrolysis and other non-carbon technologies, the cheaper it will be,” the Oxford paper authors state. to write in an opinion piece for Bloomberg.
These dynamics are not being captured by most forecasts about future energy consumption and costs that governments currently rely on to make decisions. Instead, those forecasts use more linear thinking, helping to explain why they consistently underestimate the growth of solar power capacity and its declining cost. According to calculations in the Oxford paper, which include projections for 2,905 major energy models, the cost of solar energy fell nearly six times faster than anticipated.
However, the opportunity presented by the rapidly falling costs of renewables is not lost on US companies.
Ford, together with Korean battery company SK Innovation, just announced an investment of $ 11.4 billion in four new factories (the first of its kind in more than 50 years) to help build its growing range of electric vehicles. By 2030, Ford expects 40 percent of its fleet to be electric, and it’s not alone on that front. Other major automakers, from Volkswagen to General Motors, are aggressively pushing in the same direction.
At COP26, Canada must decide where it lands on this cost-benefit issue. There is no doubt that the negative economic impact of the transition from fossil fuels will be greater than in Europe, a continent that imports most of its energy. And with the bad winds of separatism blowing louder than ever in Alberta, including a new “Free Alberta Strategy” from a collection of right-wing politicians and academics that takes constitutional illiteracy to previously unknown levels, that conversation will have to be navigated with utmost care and consideration.
Opinion: Now, with an election behind us and a federal government that has a lot of support in the climate archive, it is time for Canada to bet on the economy of the future, writes columnist @maxfawcett for @NatObserver. # COP26
But regardless of how Alberta feels, Canada cannot afford to ignore the reality of what climate change will cost or the savings to be made by adopting new technologies more quickly.
If major global players like the United States, Europe and China embark on a race to see who can decarbonize their economies the fastest, the cost of standing still will be measured in the thousands of jobs and billions of dollars we lose.
Now, with an election behind us and a federal government that has a lot of support in the climate file, it is time for Canada to bet on the economy of the future and continue to build it.