Taking action to mitigate climate change by investing in a low-carbon energy mix will save more money in the long run than inaction, even before accounting for savings from avoided climate damage costs, according to a new report by Citi Global Perspectives & Solutions (GPS), a division within Citibank.
This conclusion from the third-largest bank in the United States firmly refutes the primary argument against climate action — that it’s too costly and could lead to economic decline. The Citi report’s conclusion: Taking action to cut carbon pollution and slow global warming would result in a positive return on investment. Considering that total costs are similar under both Action and Inaction, yet the potential liabilities of inaction are huge, it’s hard to argue against a path of Action.
The report analyzes two scenarios: “Inaction,” or continuing on a business-as-usual path, and Action scenario which entails transitioning to a low-carbon energy mix.
Interestingly, the investment costs for the two scenarios are almost identical, the report found. The Action scenario is actually slightly cheaper ($190.2 trillion) than the Inaction scenario ($192 trillion) because of savings due to the rapidly falling costs of renewables, reduced fuel costs and increased energy efficiency.
When factoring in avoided climate costs, the report found that the difference in climate damage costs between low (1.5°C) warming and high (4.5°C) warming scenarios could be as high as $50 trillion. Even moderate (2.5°C) warming could cost $30 trillion less than a business-as-usual high global warming scenario.
The Citi report’s conclusion: taking action to cut carbon pollution and slow global warming would result in a positive return on investment. Considering that total costs are similar under both Action and Inaction, yet the potential liabilities of inaction are huge, it’s hard to argue against a path of Action.
Why the world’s governments continue to idle on climate action largely is due to the powerful influence of the fossil fuel industry, which spreads disinformation and uncertainty about the science and economics of climate change. It also spends billions of dollars in campaign contributions to American political candidates to delay the low-carbon transition that would benefit the global economy, the planet and everyone living on it.
The fossil fuel industry has much to lose from a transition to a low-carbon economy, the Citi report said, calling coal the “clear loser.” Its total investment bill would fall by some $11.5 trillion over the next quarter century. Gas investment also reduces though by a far smaller amount, $3.4 trillion in total.
Although the global economy would benefit from climate action, it would create “stranded assets” for the fossil fuel industry, because a large percentage of known fossil fuel reserves must be kept in the ground if we’re to avoid dangerous climate change.
Investors who have seen the writing on the wall are pressing fossil fuel companies to develop strategies for competing as the world moves toward a low-carbon global economy. In 2014, half-a-dozen investors filed shareholder resolutions with ten fossil fuel companies, including Exxon Mobil and Chevron, focusing on potential carbon asset risk, or the possibility that these companies’ present and future fossil fuel-related assets will lose value as various market factors — such as energy efficiency, renewable energy, fuel economy, fuel switching, carbon pollution standards, efforts to curb air pollution and climate policy — increasingly threaten demand for fossil fuels and related infrastructure.
The United Nations COP21 meeting in Paris in December represents the first real opportunity to reach a legally binding agreement to tackle emissions, given that all parties, including the big emitters, are coming to the table with positive intentions, against a backdrop of an improving global economy. Ahead of the meeting the United States, Canada, the member states of the European Union, and several other countries have proposed greenhouse gas emissions reductions targets. Most recently, several groups and prominent individuals have alerted world leaders to the urgent need for a clear, decisive international climate action agreement, including archbishop Desmond Tutu, designer Vivienne Westwood, Bill McKibben, Naomi Klein, Noam Chomsky and 95 other signatories of a mass call for action at COP21.