Jun 9, 2022 - Energy & Environment

Ditching coal is expensive — and a huge bargain

Data: Global Carbon Project; Chart: Axios Visuals

A new International Monetary Fund study finds huge economic benefits from phasing out coal globally even under somewhat modest estimates of the monetary damages from carbon emissions.

Why it matters: Coal is the largest global source of CO2 and coal-fired power generation reached new records last year. The study adds to literature showing that failure to stem greenhouse gases is far more expensive than investments in accelerating clean energy.

The big picture: The working paper's "baseline" estimate shows a net gain of roughly $78 trillion through 2100 due to avoided damages from climate change and health problems.

  • That's based on comparing the benefits of avoided emissions against the costs of ending coal and replacing it with renewables.
  • "This represents around 1.2% of current world GDP every year until 2100," the authors write. The study calls for more aggressive international financing and policy efforts to end coal.

What they found: That net gain factors in an estimated $29 trillion in financing needs to fully phase out coal globally, with almost half the investment needed in Asia.

  • The annual investment costs to cover these financing needs would amount to "0.5% to 3.5% of wealthy countries’ GDP, with a front-loading at around 6% of wealthy countries’ GDP."
  • But it adds: "[A]s the proverb goes, there is no gain without pain, and as we show here the gain is colossal, far larger than the pain."

Yes, but: "The cost estimate does not include compensation for affected workers, but this is likely to be small relative to the overall net gains from the transition," an IMF summary states.

Zoom in: The paper arrives at this $78 trillion "carbon arbitrage" estimate using a "social cost of carbon" of $75 per ton.

  • The "social cost" metric is a tool commonly used by regulators and scientists.
  • It estimates damages from effects of global warming like rising sea levels and flood risks, changes to human health and farm output, and more.
  • The authors call the $75 per ton figure consistent with "lower end estimates," noting the net benefits of ending coal grow with higher SCC values.

Read the analysis.

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