Transitioning the global economy to net-zero emissions by midcentury would have high upfront costs, but huge benefits in the form of reduced climate damage and industrial innovations, two new reports out today show, Andrew writes.
Why it matters: The reports each detail the enormous upsides to limiting global warming's severity, along with the growing perils from inaction.
Driving the news: The first report, from the Deloitte Economics Institute, shows that rapidly decarbonizing the U.S. economy during the next 50 years could generate $3 trillion, and add nearly 1 million more jobs to the economy by 2070.
How they did it: The Deloitte analysis compares a world in which global warming is left relatively unchecked, with average temperatures increasing to 3°C (5.4°F) above preindustrial levels, with a scenario in which the Paris temperature targets of limiting warming to "well below" 2°C are met.
- The analysis takes into account how climate change may affect productivity, economic output and growth, warning that inaction is far more expensive than spending the money needed to transition to clean energy sources.
What they found: Should emissions cuts be insufficient to forestall global warming from reaching 3°C, the U.S. economy could be hit with a bill of $14.5 trillion (in present value) during the next five decades.
- "Unchecked climate change is a costly choice for the U.S.," Alicia Rose, deputy CEO for Deloitte U.S., told Axios.
- Such a loss, Deloitte found, would be equivalent to almost 4% of U.S. GDP in 2070, or about $1.5 trillion. Insufficient action would also cost jobs, with nearly 900,000 jobs disappearing each year due to climate damages through midcentury.
- In contrast, the cost of moving the country to net-zero emissions would be about 0.1% of GDP or about $35 billion per year through 2050, Deloitte found.
Yes, but: The Deloitte report finds that the costs of the energy transition would be front-loaded, with the break-even point, or "turning point," coming during the 2041-2050 period.
Meanwhile, the second report, from the McKinsey Global Institute, takes a global view and finds that reaching net-zero emissions by 2050 would require $275 trillion of cumulative global capital spending or about 7.5% of global GDP across the 2021-2050 period.
- Like the Deloitte team, the McKinsey researchers found that the push to net zero would require front-loaded costs, with spending on physical assets increasing to as high as 8.8% of GDP between 2026 and 2030, before declining.
- The report found that transitioning to net-zero emissions may have net job gains worldwide, though these may be unevenly distributed.
- Electricity costs would likely increase as countries shift to renewables, though how high they spike and for how long depends in large part on how the transition is managed, McKinsey concluded.