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$2 trillion cost to de-carbonise the world is actually a bargain

We can avoid the worst effects of climate change, say a team of Imperial College energy engineers in a recent study, and it will only cost US$2 trillion a year, at most. This sounds an unfeasibly large…

Smoke, like US$2 trillion, gets in your eyes. Ian Barbour

We can avoid the worst effects of climate change, say a team of Imperial College energy engineers in a recent study, and it will only cost US$2 trillion a year, at most. This sounds an unfeasibly large sum of money but in fact amounts to around 1% of projected world GDP in 2050.

The study is clear on its assumptions, well-researched and balanced, and a useful update on earlier studies of a least-cost engineered solution to the problem. But it does not include the effects of how the wider economy would respond to the transformation of the energy system. GDP could be higher or lower, for example, depending on the economic policies required to bring about the change.

Man-made global warming is happening, climate scientists have warned again in the latest, fifth IPCC report released a few days ago. Since the previous report in 2007, levels of confidence have risen to 95% following greatly expanded lines of evidence that confirm earlier predictions. As is well understood, the problem is several centuries-worth of man-made greenhouse gases in the atmosphere. This is already higher than at any time over the last 800,000 years.

If we do not slow and ultimately stop adding to this build up of emissions then the potential for further damage rises. The Imperial College study argues that halving CO2 by 2050 will be enough to bring the prospective eventual rise of global temperatures to below 2°C. After 2050, this reduction must continue in order to maintain stable temperatures.

Creating value from decarbonisation

Drawing upon the International Energy Agency’s 2010 report on the prospects for energy technologies, the researchers have trawled the literature for costs of low-carbon equipment and vehicles. The study assumes projected demands for the services we want – comfort, mobility, light, power – analyses them by sector (buildings, transport and industry), and includes a detailed discussion of power generation and bioenergy. It provides details of comprehensive investments in each sector with costs and effects on energy use and emissions for 10 world regions. It’s apparent how the mix of technologies varies according to regional resources and political priorities.

Using data on energy supplies and demands from 2010, a future reference scenario is constructed for 2050, assuming that CO2 emissions are halved by 2050. Around 1% of GDP for 2050 is assumed as a net cost, while the cost of new low carbon equipment is offset by the costs of the fossil-fuel-using alternatives that are no longer needed. Generally, the study’s range of cost estimates are not unduly optimistic.

So the direct cost of 1% is modest in comparison to its benefits. As an insurance policy against the potential disaster of extreme climate change and the burdens of air pollution from fossil fuels puts on health, it seems cheap. Plus, the investment in low-carbon buildings, equipment and vehicles may well bring indirect economic benefits - higher incomes and new technologies that increase GDP and employment.

While this study confirms others in pointing out what must be done - decarbonising the economy - it does not explain how it could be done, nor when. There may be a feasible solution for 2050, but we need an idea of the feasible pathways that will get us there.

Finding the tools to get us there

The carbon price the study finds as necessary varies between US$30 and US$39 per tonne of CO2 by 2050, depending on the assumed price of fossil fuels. This price is calculated by the increase in costs from 1 extra tonne of reducing CO2 emissions across the board at the point where the target of halving emissions by 2050 is achieved at minimal cost.

But this price is low compared to the carbon prices beyond US$100 from studies for similar targets using models that incorporate economic responses. Either carbon prices must be much higher, or lower carbon prices need to be combined with other incentives and tighter regulations.

This engineering approach probably overestimates the effects of changes in relative prices, given how long it is taking to transform energy generation systems. And imposing carbon taxes or emissions trading schemes come with their own political or practical difficulties.

The policies required for the ideal engineering solutions have to be articulated more fully to inform governments how they should proceed. The team’s carbon price affects the prices of carbon-based fuels, yet there is no institutional detail. Implicitly there is a need to strengthen regulations and standards to reduce emissions from equipment and vehicles.

Looking at a wider picture, if the transformation of the energy system were a component of a green growth policy, the engineering “costs” can be seen as investments in new technologies creating new industries and jobs. Indeed such a technological revolution could lead to higher growth in the long term.

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4 Comments sorted by

  1. John Doyle

    architect

    Interesting isn't it? We are all still beholden to "growth". All discussion is based on growth.
    Can the planet keep us thriving for ever? How about No? Not the way we are going now.
    When will we [by we I mean the general population] understand growth for ever is not an option?
    Efficiencies in production and saving of wastage etc. just puts off the day of reckoning.
    I don't see that forecasts I read factor in the loss of fisheries and other foods through overexploitation.
    Climate warming is just one cog in this vast machine. It may tip us over the edge, but so may some other event.
    Medicine may continue to extend our lifespans in spite of battling the production of profitable but unhealthy foodstuffs. There are just so many other scenarios besides climate change that will shape our future.
    First though we need to address the obsession with profit because even climate change progress is subordinate to that mind set.

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  2. Lee Nhan

    logged in via Facebook

    Give me 100 trillion, I will make the world any no more smoke columns ka ka
    I want to let you know that - I have found one new method - making wind energy becomes complete , wonderful , nicely - not damage the natural landscape - not fear severe weather - is not too noisy - continuous operation 24/7/365 - it will be renewable energy clean, green for future -It can also very useful in the field of transportation - large tonnage, and the cost is no longer a problem making everyone worry , cost savings , inexpensive for people , and many other benefits
    With characteristic continuous operation should not need expensive storage systems and cumbersome Details at www.trongdong.weebly.com

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  3. David Arthur

    resistance gnome

    $2 trillion per year?

    How much speculative money is loose in the world's trading markets, flitting from commodity to commodity to derivative and occasionally targetting a particular city's housing market to inflate, then burst, a bubble?

    Wouldn't it be something if this money could be channelled into productive investment in, say, non-fossil power?

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  4. Paul Richards

    integral operating system

    Terry Barker's byline is disturbing; "$2 trillion cost to de-carbonise the world is actually a bargain" Cheap at what cost? Importantly the Imperial College recent study in the conclusion in part reads; "Underlying the decarbonisation of the economy for each region studied ... power generation with a mix of nuclear, renewables technologies (including hydro, wind, solar and biomass) and CCS applied to fossil and biomass fuels. "All good up till one option, nuclear power.
    The history of the nuclear…

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