Which would you rather have: a global economy that gains $43 trillion or loses $178 trillion over the next 50 years? This is the stark choice between action and inaction on climate, according to a new report by Deloitte and RMI. Never has doing the right thing made such economic sense.
Like a line of headlights from oncoming traffic, the financial reports in favor of transitioning away from fossil fuels keep coming. It’s no surprise that heavyweights such as Deloitte, Swiss Re, McKinsey, and others have added their voices to the chorus. The common refrain? Maintaining the status quo will be much more expensive and painful than embracing new technologies – and the economy and individuals will benefit if we move fast.
The logic is crystal clear: the cost of changing to a low-carbon economy has dropped so fast that more than 80 percent of all new electricity generation this year in the U.S. and the world will be from carbon-free sources. This means governments and companies can save money by transitioning more quickly to cleaner technologies. At the same time, the costs of climate disruption, borne primarily by taxpayers, continue to ratchet up.
Americans have gotten the memo as well. According to a new poll from Pew Research, 69% of the U.S. population favors steps toward the country being carbon neutral by 2050, with 67% of young Republicans supporting that shift.
Encouraging news, but we are realistic about the challenges. Transitioning away from fossil fuels is complicated and has to be smoothly orchestrated to prevent shocks in the short term. But there’s no doubt a tsunami is coming, as the price point for renewable energy declines even further and capacity to deliver it grows. Already, saving the planet feels less like a sacrifice and more like the smart financial choice it is.
We welcome your thoughts and questions and hope you will share this newsletter with others who are curious about climate.
The C-Change Conversations Team
“… rapid global decarbonization could yield an economic dividend of $43 trillion by 2070 compared to a world of unchecked climate change. In addition to reducing climate damages, a swift transition to clean energy could save trillions of dollars in avoided energy costs – capital that companies and governments might use to power new business investment and faster economic development.”
by Deloitte and RMI
News of Hope
The quote above says it all: shift to a low carbon economy and we will make money and save money. Not convinced? According to a new paper from Tesla, the manufacturing investment needed to transition to a sustainable economy by 2050 would be $10 trillion (supporting production of wind turbines, solar panels, EVs, battery recycling, and mining infrastructure for raw materials).
Continuing to rely on oil, coal, and natural gas, according to Tesla, could end up costing $14 trillion globally in the next 20 years. Furthermore, the paper explains that hydrocarbon supplies will dwindle and become more costly, and the current energy mix is as wasteful as it has always been – only 36% of fossil fuel energy produced leads to productive work or heat. The rest gets lost along the way from the ground to the consumer’s gas tank or light bulb.
Sure, the shift to clean energy will benefit Tesla and its shareholders, but the company is not the only one pointing to higher costs of relying on fossil fuels. Many economists and corporate, scientific, and academic institutions have put the price of inaction even higher.
At the local level, there are plenty of innovative examples of choosing action over inaction. Carbon dioxide from the boiler in a New York City apartment building is captured, converted to liquid, and transported to Brooklyn where it is combined with cement into concrete blocks for new construction that doesn’t emit greenhouse gases. (Building and infrastructure materials and construction are responsible for 13% of annual global CO2 emissions.)
In a tiny Texas town near the Mexico border, innovators have created an “earthen battery” to help balance the power grid. By channeling excess wind and solar power to pump water into underground storage, it can be released later when the energy is needed. This approach also is being piloted with deeper and hotter geothermal wells, where temperatures exceed 300℉. Pressure plus heat could potentially generate twice the energy than pressure alone.
Offshore, oceans soak up 30 to 40% of carbon dioxide produced by humans, and it is killing coral reefs and imperiling shellfish and the food chain for fish like salmon and mackerel. MIT researchers, however, have developed what may be an efficient and inexpensive system for removing carbon dioxide from seawater. Desalination plants, ships, offshore drilling platforms, and aquaculture fish farms are all possible “hosts” for the technology that could filter out CO2.
There is also great momentum in reducing greenhouse gases from transportation, which is the sector that emits the most in our country. EV sales are rapidly increasing, doubling last year to represent almost 6% of U.S. sales, and electrifying more cars is a smart policy to significantly decrease emissions overall. Last month the EPA proposed new car pollution rules that would accelerate that transition even faster – potentially leading to two-thirds of new passenger cars and a quarter of new heavy trucks sold in the U.S. to be all-electric by 2032.
These new rules, if established, would avoid nearly 10 billion tons of carbon emissions through 2055, which is more than twice the total U.S. carbon emissions in 2022. There are questions whether consumers and manufacturers can make such a large transition so quickly, and there are challenges ahead in securing enough battery raw materials and increasing the grid’s transmission capacity. Whether or not the EPA rules stand, this proposal puts industry, consumers, and capital markets on notice that mass electrification is coming.
News of Concern
Unfortunately, there are some stiff counterwinds to climate action and the clean energy transition. Oil and gas companies that have experienced record profits, in part due to the upheaval of the Ukrainian crisis and a rebounding post-Covid global economy, are backtracking on their pledged transitions to cleaner energy forms.
In fact, new oil and gas extraction projects would potentially add 30 times the U.S. total of carbon emissions in 2021. It’s clear that we can not count on supply dwindling fast enough to keep the world in a safe place. It will be up to policy makers and consumers to do the difficult work of lowering demand.
There’s another stiff counterwind: state and local politics haven’t caught up to the new economic reality. Even though conservative states are gaining a huge number of new jobs and economic growth from the energy transition, especially after the passage of the Inflation Reduction Act, old allegiances with fossil fuel intensive industries remain strong.
Case in point: Texas. The Lone Star State gets about 40% of its electricity from renewable energy, leads the country in battery storage and wind, and will overtake California in solar by the end of this year. Its own grid operator admits Texans saved around $11 billion last year due to renewable energy’s lower pricing and recognized its critical role in keeping the lights on during last summer’s crippling heatwave. Yet the Texas Senate has passed a bill to slow renewable energy and expand fossil fuels, a move vehemently opposed by utilities, electric co-ops, and environmentalists. Stay tuned as that saga plays out. While politics may rule in the short run, our money is on common sense-economics to win out in the end.
The same goes for the debate over Environment, Social, and Governance (ESG) investment policies. While conservative policy makers in Texas and elsewhere are pushing back against ESG policies and label them “woke” and harmful, the result is more smoke than fire. Pension funds warn that limiting investments in ESG would cost states billions of dollars and harm retirees. At the same time, investors are demanding ESG options, as they recognize climate change is a direct risk to companies’ bottom lines and that carbon intensive players will face regulation and increasing customer disapproval in the future.
Joining pension managers and retirees is another group with a financial stake in climate action: commercial and recreational salmon fishermen. The heat and drought that come with climate change, plus heavily engineered waterways, have led to the end (in California) and curtailment (in Oregon) of king salmon fishing in 2023 due to a serious decline in fish stocks. At times, the ocean off the California coast already has gotten as hot as climate change models predicted it would be at the end of the century, a devastating development for the salmon-fishing industry and consumers. In 1995, more than a million of the Chinook salmon swam from the ocean to Central Valley rivers. This year, fewer than 170,000 are expected to make the trip.
Speaking of heat, as we approach the warmer days of summer, avid baseball fans know that batters will hit more home runs in hotter, humid weather. Last month, scientists verified this “inside baseball” statistic, concluding that more than 500 home runs since 2010 can be attributed to climate change and that 10% of all home runs by the end of the century could be linked to warming global temperatures. Will there be an asterisk by home run records of the future? Will there be a rumbling for climate action among baseball purists who not only want to protect themselves and their families from the effects of climate change but also prefer home runs that aren’t aided and abetted by climate shifts?
As economists warn that limiting global warming to 1.5 degrees Celsius will cost many more trillions than anticipated, the Wall Street Journal looks at how the funds could be spent, and who would pay.
The shift to a net-zero emissions world will create opportunities for businesses and countries. These could be in three areas:
The GIF above and quote that follows nicely sum up the cost of inaction and the benefits of action, of where we are headed and why we need to go there. Both are from the McKinsey Global Institute report The net-zero transition: What it would cost, what it could bring.
“The economic transformation required to achieve net-zero emissions by 2050 will be massive in scale and complex in execution, yet the costs and dislocations that would arise from a more disorderly transition would likely be far greater, and the transition would prevent the further buildup of physical risks. It is important not to view the transition as only onerous; the required economic transformation will not only create immediate economic opportunities but also open up the prospect of a fundamentally transformed global economy with lower energy costs, and numerous other benefits – for example, improved health outcomes and enhanced conservation of natural capital.”
Just for Fun
Bacon and eggs or avocado toast for breakfast? Chicken tacos or pepperoni pizza for dinner? You might be able to guess what’s better for your family’s health, but what about the health of the planet?
Researchers from Tulane University and the University of Michigan found that Americans with the highest climate-impact diets account for five times more emissions in a day than the lowest-impact diets.
Take this quick and easy quiz to find out whether your diet contributes to climate change and learn ways to reduce your carbon footprint through your food choices … except when it’s time to splurge!