Climate Progress

Here is the problemmatic paragraph in Time’s otherwise solid issue on global warming:

If we took all the steps outlined here–a national cap-and-trade system with teeth, coupled with tougher energy-efficiency mandates and significant new public and private investment in green technologies–where would that get us? We’d be a little poorer–a sustained battle against climate change will hit our wallets hard, absorbing perhaps 2% to 3% of gdp a year for some time, according to energy expert Henry Lee at Harvard’s Kennedy School of Government, though unchecked warming could end global prosperity. But think of it as an investment: that money, if matched by action internationally, can reduce emissions radically over the next half-century, contain warming and lead us to a postcarbon world.

Not quite. The battle will not absorb perhaps 2% to 3% of GDP a year for some time. It will redirect 2% to 3% of GDP a year for some time. Big difference — one that I have no doubt will crop up over and over again in the debate in the coming months and years, which is why I am blogging on it.

We need to shift 2% to 3% of GDP from investment in inefficient and carbon-intensive energy supply and demand technologies into efficient and low-carbon technologies. But that money doesn’t disappear from the economy — it just gets invested differently.

Equally important, much of the savings from energy efficiency pays for the extra cost of low-carbon energy (see “McKinsey: Fighting climate change is affordable“). That’s why the net GDP cost is closer to 0.1% per year, according to the IPCC (see “Absolute MUST Read IPCC Report: Debate over, further delay fatal, action not costly”), which concluded:

In 2050, global average macro-economic costs for mitigation towards stabilisation between 710 and 445ppm CO2-eq are between a 1% gain and 5.5% decrease of global GDP. This corresponds to slowing average annual global GDP growth by less than 0.12 percentage points.

For more discussion of this issue, check out this new analysis from Environmental Defense Fund, “Cost of Cutting Carbon: Pennies a Day.”

This entry was posted on Monday, April 21st, 2008 at 12:16 pmand is filed under Economics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.