May 23, 2022 - Energy & Environment

New report highlights the steep costs of climate inaction

A wildfire burns down a home in a coastal area south of Los Angeles in May 2022.
Firefighters battle the Coastal Fire in Laguna Niguel, Calif. on May 11, 2022. (Wally Skalij/Los Angeles Times via Getty Images)

Unchecked climate change would be a major impediment to economic growth during the next 50 years, costing an estimated $178 trillion in net present value terms during the 2021-2070 period, a new study concludes.

The big picture: The study from the Deloitte Center for Sustainable Progress models the impacts of a 3°C increase in global average temperatures compared to preindustrial levels, which is consistent with the world's current pathway.

  • It shows the associated effects on future productivity, economic output and growth across industries and regions.

Zoom in: In contrast to unchecked warming, the report states that if countries act quickly to reach net-zero emissions by 2050 and hold global warming to below 2°C, the global economy would see an expansion of $43 trillion in net present value during the 2021-2070 period.

Yes, but: There will be a period of time, potentially lasting a few decades, when the upfront costs of the clean energy transition would outweigh the benefits, the report notes. (A similar tone was struck in a McKinsey report last year.)

Context: The stakes may be highest in the Asia-Pacific region, the report finds, because a 3°C scenario would hit GDP the hardest there. This is partly due to the region's vulnerability to extreme weather events.

  • A climate change-related spike in the severity and frequency of extreme heat events, large wildfires and heavy precipitation events are already occurring around the world. These disasters are having far-reaching effects, such as the heat wave in India and Pakistan that began in March and led India's government to halt wheat exports due to a drop in its output.
  • These trends are taking place when the planet has only warmed by about 1.1°C (1.98°F) since the start of the industrial revolution.
  • With the globe currently on course for at least 3°C of warming by 2100, barring rapid and steep greenhouse gas emissions cuts, far more significant impacts are virtually guaranteed.

What they're saying: "Insufficient action to mitigate climate change is a policy choice that can be made," said the report authors Pradeep Philip and Claire Ibrahim, via email. "But it is a choice that comes with a high cost."

  • "Ultimately, every business knows that investment takes time to generate returns but without investment, you can’t grow," Philip and Ibrahim told Axios. "Business leaders make these decisions all the time — they find new funds, they reallocate existing funds, and they invest in both repair and maintenance but also in the new capital to drive their businesses," they said.
  • "This is the same for how we should think about the path to net-zero for our economy."
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