What Will It Cost To Tackle Climate Change?

In its lengthy Fiscal risks report - July 2021 the UK government's Office For Budget Responsibility noted the following:

"The UK experienced a 10 per cent loss of output and committed 12 per cent of GDP in public funds in order to combat the pandemic in 2020. The annual economic and fiscal costs of tackling other potential catastrophic risks, like climate change, are likely to be just a fraction of this." (p84)

"Between now and 2050, the fiscal costs of reducing net emissions to zero in the UK could be significant but not exceptional." (p154)

"The costs of failing to get climate change under control would be much larger than those of bringing emissions down to net zero." (p155)

"While economic theory and practice emphasises the option value of delaying decisions, this can be suboptimal in the face of rapidly rising costs. Pandemics, climate change, and public debt dynamics are all subject to amplifying feedback mechanisms and tipping points that can result in spiralling and irreversible costs that put a premium on acting early." (p26)

In October 2021 the IEA's Net Zero by 2050 - A Roadmap for the Global Energy Sector (2.6 Investment) estimated:

"The radical transformation of the global energy system required to achieve net-zero CO₂ emissions in 2050 hinges on a big expansion in investment and a big shift in what capital is spent on. The NZE [Net-Zero Emissions by 2050 Scenario] expands annual investment in energy from just over USD 2 trillion globally on average over the last five years to almost USD 5 trillion by 2030 and to USD 4.5 trillion by 2050. Total annual capital investment in energy in the NZE rises from around 2.5% of global GDP in recent years to about 4.5% in 2030 before falling back to 2.5% by 2050." (p82)

However, this caveats:

"Behavioural changes are important in reducing energy demand in transport, buildings and industry. If the changes in behaviour assumed in the NZE were not attainable, emissions would be around 2.6 Gt CO₂ higher in 2050. Avoiding these emissions through the use of additional low-carbon electricity and hydrogen would cost an additional USD 4 trillion."

"A failure to develop CCUS for fossil fuels would substantially increase the risk of stranded assets and would require around USD 15 trillion of additional investment in wind, solar and electrolyser capacity to achieve the same level of emissions reductions"