The trillion-dollar hole in Abbott's climate policy logic | RenewEconomy

The trillion-dollar hole in Abbott’s climate policy logic

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While the Coalition maintains that ambitious targets for renewables and emissions reduction would be economically catastrophic for Australia, a new report from Citigroup has come to exactly the opposite conclusion: strong climate action could save governments around $1.8 trillion by 2040, while inaction could cost as much as $44 trillion by 2060.

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A new report from global investment giant Citigroup has blown a great big hole in the Abbott government’s logic for aiming low on emissions reduction and renewable energy growth.

The Coalition’s justification for its low-ball climate targets has been, consistently, relentlessly, that it was the economically responsible policy path for the government to take. On the other hand, it argues, the costs of Labor’s “ideological obsession” – a proposed 50 per cent renewable energy target by 2030, and more ambition on emissions reduction – would be “simply catastrophic.”

Unfortunately for Tony Abbott and his environment minister Greg Hunt, the report published by Citi on Tuesday – Why a Low Carbon Future Doesn’t Have to Cost the Earth – suggests this line of logic is deeply flawed.

The report, which seeks to objectively analyse the economics of acting – or not – on climate change, finds that its ‘Action’ scenario – in which governments invest heavily in overhauling their energy markets, transport sectors and industries to a low-carbon mix – results in an undiscounted saving of $1.8 trillion out to 2040.

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This is because, while governments spend more on renewables and energy efficiency in the early years (and yes, Citi does factor in the cost to existing industries of a massive shift to low-carbon energy sources), the savings in fuel costs in later years offset earlier investment, says the report.

Moreover, it adds, “if the scientists are correct,” – and strangely enough Citi believes they are – “the potential liabilities of not acting [listed further on in the report as global food shortages, widespread drought, mass population displacement, increased flooding, etc] are equally vast.”

“The cumulative ‘lost’ GDP from the impacts of climate change could be significant, with a central case of 0.7%-2.5% of GDP to 2060, equating to $44 trillion on an undiscounted basis,” the Citi report says.

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The report finds that the cumulative losses to global GDP from climate change impacts (‘Inaction’) from 2015 to 2060 are estimated at $2 trillion to $72 trillion depending on the discount rate and scenario used. Lower discount rates encourage early action.

If emissions continue to rise and therefore temperature continues to increase after 2060, the negative effect on GDP losses could become more than 3% of GDP with estimates ranging from 1.5% to almost 5%.

More worryingly, the report notes that under an ‘Inaction’ scenario, the world would be locked to a high-emissions infrastructure and the damages could continue for more than a century, with the highest impacts of GDP foreseen in south and south-east Asia, Africa and the Middle East.

“The estimated damages could be larger as these economic studies only measure those impacts that are quantifiable and largely concentrate on market or near market sectors. Other impacts such as tipping points, weather related events or catastrophic risks are not included in the studies.”

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One the other hand, says Citi, “if we derive a risk-adjusted return on the extra capital investment in following a low carbon path, and compare it to the avoided costs of climate change, we see returns at the low point of between 1% and 4%, rising to between 3% and 10% in later years.”

So, on a risk adjusted basis this implies a return of 1-4 per cent at the low point in 2021, rising to between 3-10 per cent by 2035, the report finds.

“Not spectacular returns,” Citi concedes, “but against current low yields… it represents a relatively attractive option.” And, of course, there is the added benefit of avoiding catastrophic global warming.

Summing up, the Citi report has this to say: “With a limited differential in the total bill of Action vs Inaction (in fact a saving on an undiscounted basis), potentially enormous liabilities avoided and the simple fact that cleaner air must be preferable to pollution, a very strong ‘Why would you not?’ argument regarding action on climate change begins to form.”

Can someone let Abbott know?

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  1. More to the Point 5 years ago

    What are these emissions you keep going on about? When are you going to grok the fact that there is NO “catastrophic global warming”. It seems like you’re just trying to feather your own bed.

    • john 5 years ago

      And on what facts do you draw that conclusion?

      • Neil Frost 5 years ago

        The fact is simply this
        If we do nothing and there rite it’s bad.
        If there wrong but we act anyway it sure won’t hurt anyone
        Better to be on the side of caution if your not convinced

        • nakedChimp 5 years ago

          Don’t try to bring simple logic and basic survival instincts to the table. 🙂

    • Dimitar Mirchev 5 years ago

      “there is NO “catastrophic global warming” *YET*”

      There – fixed.

      By the time every denialist is convinced that there is AGW or it is our fault or there will be catastrophic consequences it will be faaaaaaaaaaaaaar to late

      • JonathanMaddox 5 years ago

        It’s not even true that climate change is not “yet” a catastrophe.

        While it’s logically and morally dubious to make a firm claim that any single event is a direct result of anthropogenic greenhouse gas emissions (since the events themselves are individually unpredictable and some would still have occurred in some hypothetical climate-change-free world), the prevalence of adverse weather events is definitely already measurably changed as part and parcel of climate change, which statistically speaking most certainly is a result of human greenhouse emissions.

        Each flood, each heat wave, each prolonged cold snap (Rossby waves affected by higher Arctic temperatures) each hurricane and each late monsoon is a catastrophe, small or large, for the people affected.

    • Thylacine 5 years ago

      And your peer reviewed paper(s) to support this assertion is…….

    • Rob G 5 years ago

      Troll Alert!

    • ClimateWarriorMelb 5 years ago

      You guys are obviously smart. Why do we allow this sort of idiocy to divert us enough to even bother with replying? (Guess self sort of included now!)

      • mick 5 years ago

        mate even an educated fish will take a well presented bait

      • Chris Fraser 5 years ago

        Not worried about the troll, but I learned a new word from it !

    • shinytop 5 years ago

      You jest, of course!

    • nakedChimp 5 years ago

      Damn, I thought we had a nice discussion going on here with 14 replies when I looked at it, but it’s just a troll being feed some.. 🙁

  2. Steve159 5 years ago

    I’m sure it’s merely an oversight, but what report?

    Name, date of publication and link, if possible would be good.

    Even if it’s behind a paywall, or subscriber only, I think Sophie should cite her references.

    • Sophie Vorrath 5 years ago

      it’s “A new report from global investment giant Citigroup”. – their latest Citi GPS Global Perspectives and Solutions report, called “Why a Low Carbon Future Doesn’t Have to Cost the Earth”.

  3. nakedChimp 5 years ago

    Hm.. how much longer can the incumbent FF profiteers hold out?
    Even major financial institutions deem it cheaper and more economical to go RE. Momentum is definitely building.

  4. Bryan Elliott 5 years ago

    Is there a link you can provide to the Citigroup report?

    Edit: Nevermind; found it:

Comments are closed.

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