Failure to act on climate will cost trillions, trash global economies

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Three new reports say governments can either act now on climate, and reap trillions of dollars in benefits – or miss the window and put a wrecking-ball to GDPs.

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As Australia plays nice at the Pacific Islands Forum – the scene of would-be prime minister Peter Dutton’s 2015 accidentally overheard sea-level rise joke – no fewer than three new reports have this week warned of the massive economic cost of failing to act on climate change.

The first, from the Global Commission on the Economy and Climate, puts forward a “conservative estimate” that bold action to avoid the high risks of a changing climate could deliver $US26 trillion in global economic benefits through to 2030, compared with business-as-usual.

Meanwhile, the economic costs of inaction – to say nothing of the environmental costs – were mounting faster, and were greater than previously recognised.

The New Climate Economy report says the next two to three years offer a “critical window” for governments, when many of the policy and investment decisions that shape the next 10—15 years will be taken.

For Australia, which has so far proven unable to commit to any semblance of an honourable or actionable climate policy, and which is headed to a federal election in a matter of months, that window is rapidly closing.

“We are at a unique ‘use it or lose it’ moment”, said Ngozi Okonjo-Iweala, former finance minister of Nigeria and co-chair of the Global Commission.

“Policy makers should take their feet off the brakes, send a clear signal that the new growth story is here and that it comes with exciting economic and market opportunities. $US26 trillion and a more sustainable planet are on offer, if we act decisively now.”

As the report notes, around $US90 trillion is expected to be spent on new global infrastructure to 2030, and ensuring this is sustainable will be a critical determinant of future growth and prosperity.

According to the report, the priorities for urgent policy action include putting a price on carbon, enforcing mandatory disclosure of climate-related financial risk, and investing in sustainable infrastructure and technology.

“We can now see that this new growth story embodies very powerful dynamics: innovation, learning-by-doing, and economies of scale,” said Lord Nicholas Stern, professor of economics and government at the London School of Economics and another co-chair of the Global Commission.

“Current economic models fail to capture both the powerful dynamics and the very attractive qualities of new technologies and structures.

“Thus we know we are grossly underestimating the benefits of this new growth story. And further, it becomes ever more clear that the risks of the damage from climate change are immense and tipping points and irreversibilities getting ever closer.”

The second report, Australian-based research jointly produced by the University of Melbourne, the ANU and and the CSIRO, comes to a similar conclusion: the economic benefits of complying with the Paris Accord are “substantial”; the alternative, not an option.

“The global gains from complying with the 2°C target are approximately $US17,489 billion per year in the long run (year 2100),” the AGU100 report says.

“The relative damages from not complying to Sub-Sahara Africa, India, and Southeast Asia, across all temperature ranges, are especially severe.”

The report says the results the research “clearly show” that the effects of global warming will increase over time and become much worse in relatively poor African and Asian nations, where the loss in GDP is most severe.

“But, indeed, over the medium term, despite some minor gains in a few European countries, the losses from global warming (at 3°C) dominate a major part of the world.”

Using the value of GDP in 2017 from IMF (2018) as the base year, the AGU100 report estimates the approximate global potential loss to be $US9,593.71 billion or roughly 3 per cent of the 2100 world GDP for 3°C of global warming.

At 4°C, losses from global warming increase significantly to $US23,149.18 billion – again, the largest losses in all cases, and for all temperature increases, occur in Sub-Saharan Africa, India, and Southeast Asia.

“The losses in GDP and the gains from complying with the Paris Accord, even in this limited framework, are substantial, as indicated,” the report concludes.

“What is perhaps as equally disturbing is how the percentage fall in GDP varies across the world and is most severe in many of the poorest countries.

“The often severe falls in GDP in the long term will put many governments in fiscal stress, since tax revenues are tied to GDP or national income levels.

“In addition, if global warming is tied to increases in the frequency of weather events and other natural disasters, which invoke significant emergency management responses and expenditures, the pressure on government budgets will be doubly severe,” the report says.

And finally, it adds, “it is important to note that the results (of the research)… assume that the United States remains in the Paris Accord and that all countries that have agreed to emission reduction targets honour their commitments.

“This is all questionable.”

The final report, this time commissioned by the City of Melbourne, puts the cost to the Victorian economy of not doing its bit on emissions, at $A12.6 billion from 2020 to 2050.

Melbourne, which has a zero emissions by 2050 target, has been a heavy lifter in driving low emissions energy development in Victoria, in its role leading the Melbourne Renewable Energy Project, or MREP.

But as Melbourne City councillor Arron Wood noted in November of last year, that ground-breaking project was both conceived and born in environments of federal policy uncertainty.

“It’s funny and disappointing that when we started the project, it was a time of extreme policy uncertainty,” Wood told Reneweconomy in an interview on Thursday.

“The RET was under review, investment had fallen off the cliff as a result of the uncertainty, and the CEFC was on the chopping block.

“(Now), while we’re really excited and happy to see the leadership that’s been shown by the Victorian government… I almost feel a little bit like it’s back to the future with the uncertainty …

“I guess I’m a bit angry that we’re still waiting for that national policy certainty. …There’s only so much heavy lifting that local governments and corps can do.”

In comments this week, the City’s environment portfolio chair Councillor Cathy Oke said this city-state-federal disconnect in Australia remained a major concern.

“Cities have stepped up to act on climate change… Without policy changes in state and federal jurisdictions we will not be able to achieve the Paris Climate Agreement targets.

“Together with all different levels of government there is a significant opportunity for collaborative action to accelerate emission reductions and increase the level of ambition to deliver on our commitment.”

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