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Climate Change and the Economy: What Are the Real Costs? BY SARAH CHONG

September 26 2020

With summers getting hotter and winters becoming shorter, climate change is one of the most pressing matters of the 21st century. However, while the halting of climate change and the protection of the economy are often seen as clashing causes, the two are becoming increasingly interwoven as environmental destruction disrupts economies around the world.

Climate change has cost the US economy at least $240 billion per year in the past decade and is estimated to rise to $360 billion per year in the next decade. According to Mark Jacobson, Stanford University's professor of Civil and Environmental Engineering, global warming could cost the world up to $30 trillion a year.

“A portion of this cost is already occurring due to enhanced wildfire damage, hurricane damage, floods, droughts, agricultural losses, and health costs. Higher temperatures, in fact, increase air pollution, which is already the 2nd leading cause of death. They also increase heat stress and heat stroke,” the professor wrote to RevNow over an email. Although natural disasters like droughts and heat waves aren’t directly caused by climate change, the increase of the Earth’s temperature by 1.8F (1C) has made these disasters much more intense and frequent.

According to the National Oceanic and Atmospheric Administration (NOAA), extreme weather events have cost the U.S.A over $1.75 trillion since 1980. Hurricane Katrina is the most costly hurricane ever in US history, costing an estimate of $160 billion across nine states. However, according to the University of North Texas Professor Bernard Weinstein, the actual cost of Katrina was $250 billion including economic losses. Hurricane Katrina alone had displaced over a million people in the Gulf Coast region. Up to 600,000 households were still unable to return home. More than 1 million housing units were destroyed by the hurricane.

In addition to the tremendous amount of money spent on rebuilding and repairing, the loss of productivity was also costly. The hurricane forced 614 out of the 819 manned oil platforms in the Gulf of Mexico to be evacuated. It reduced oil production by a third. Katrina also damaged 19% of US oil production, causing oil prices to increase by $3 per barrel. The lasting effects of Katrina serve as reminders of the long-term consequences of these increasingly frequent disasters.

However, Katrina isn’t the only example of how increased natural disasters are affecting the economy. The world’s largest insurance agency, Munich Re, blamed climate change for a loss of $24 billion due to California wildfires, which have become more and more frequent in the past few years.

One of the hot topics in the climate change reduction discussion is to transition from burning fossil fuels to using clean and renewable energy. According to Science Direct, transitioning to renewable energy would cost the US up to $120 trillion, but it would also have positive impacts on economic growth and employment. It could potentially create up to 11.6 million jobs, both directly and indirectly.

So far, transitioning to clean energy (wind and solar energy) has created over 4 million jobs since January 2018, and the International Symposium on Technology and Science (ISTAS) predicted that 188,000 green jobs were created since 2000 in Spain. A white paper from the US National Renewable Energy Laboratory (NREL) included studies in Europe and Germany, which revealed that public investment in renewable energy development has a net positive impact on employment.

Furthermore, climate action is necessary to save jobs that rely on stable and healthy environments, such as agriculture. The International Labour Organization estimated in 2018 that climate change threatens about 1.2 billion of such jobs. And by achieving the Paris Agreement (2C) goals, countries could create a net growth of 18 million jobs.

If transitioning to renewable energy would bring about so many jobs and have a positive impact on the economy, why aren’t politicians embracing the idea of a country running on clean energy?

Transitioning to clean energy is easier said than done. The cost of the transition itself is high, costing up to $4.5 trillion if the US were to be completely run on clean energy by 2030. The American Action Forum estimates that the cost for a country to be using 100% renewable sources would be at least $5.7 trillion and $423.9 billion annually. The forum also states that this target is impractical as it would cost more than the US’s annual spending on electricity.

Not only is there a staggering cost to pay, but renewable energy just might not work on such a large scale. Let’s say an entire city is powered by wind turbines, the city isn’t windy 24 hours a day, 365 days a year. There will be times where there is a complete stand still in the air. What should the city do at times where there is no wind to supply energy? Do they wait in darkness until the wind returns? This goes the same for other renewable energy like solar and hydropower. Unlike renewable energy, the burning of fossil fuel doesn’t rely on the weather and can be supplied 24/7.

Renewable energy also isn’t 100% pollution free. The facilities required to collect the energy and the storage, transportation and distribution of these ‘clean’ energy still leave a carbon footprint. ‘Renewable energy relies on fossil fuels, whereas fossil fuels do not rely on renewables,’ states personal finance blog Vittana.

In spite of these possibilities, the majority of the public still believes that transitioning to clean energy is a must. A poll suggested that 63% of national US adults believe that the Green New Deal, popularized by Alexandria Ocasio-Cortez, is a favorable proposal. Yet, the American government continues to stray further away from global warming reduction, as shown by President Trump’s announcement that the US will back out from the Paris climate agreement. Due to policies like Citizens United, corporations play an unchecked and significant role in politics through lobbying and campaign donations. Without the support of these corporations, environmentalists have a hard time trying to pass environmental proposals.

Now, the question still stands: will countries ever be able to transition towards running completely on clean energy? Mark Jacobson thinks so. "Transitioning reduces aggregate energy costs that people pay worldwide by about 60% and aggregate social costs (energy + health + climate costs) by about 90%. Most of the energy cost reductions are due to the fact that a 100% clean, renewable energy system reduces energy requirements by about 57% worldwide. The rest is due to the lower cost of energy per unit energy due to clean, renewable energy compared with fossil fuels. In sum, transitioning completely to renewable energy saves consumers money. It will also create more jobs than lost and reduce air pollution, health problems and climate problems," Jacobson said in an interview.

Despite high initial costs, transitioning to renewable energy can benefit not only the environment, but the long run wellbeing of the economy. Renewable energy technology is readily available for those who are willing. It is now in the hands of the government to take action to reduce reliance on coal power plants and start making use of such technology on a wide scale.

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Credits:

Created with an image by Patrick Hendry - "Took a walk on lunch break to create a collection of industry and “gas punk” type photos. "