Up to $44 trillion could be going up in smoke if the world does not act on climate change, according to the latest piece of research from U.S. banking giant Citigroup.
The report – Energy Darwinism II: Why a Low Carbon Future Doesn’t Have to Cost the Earth — has forecast that spending on energy will hit around $200 trillion in the next 25 years.
The study then examines two scenarios: one that Citi describe as an “‘inaction’ on climate change scenario”, and another that looks at what could happen if a low carbon, “different energy mix” is pursued.
“What we’re trying to do is to take an objective view at the economics of this situation and actually look at what the costs of not acting are, if the scientists are right,” Jason Channell, Global Head of Alternative Energy and Cleantech Research at Citi, told CNBC Tuesday.
“And those are rather alarming numbers in themselves,” he added. “I mean, the central case we have in the report is that the costs in terms of lost (gross domestic product) GDP from not acting on climate change can be $44 trillion dollars by the time we get to 2060.”
“So it’s not a sort of a zero sum game, there is a cost to not doing this, and although there is a cost to acting, what we’re trying to do is to actually weigh up the different costs here.”
However, lower oil prices have dampened current desire for greater investment in renewables and energy efficiency.
“Low oil prices make it… perhaps less attractive to invest in renewables now,” Channell admitted.
“But there is a flipside of looking at this, which is to say that… oil either acts as a boost or a brake on the global economy, and historically it’s been about 3 and 10 percent of global GDP, the total cost of energy,” he added.
Channell went on to say that lower energy prices arguably gave more space to spend money on energy efficiency and different types of energy, “without slowing the global economy.”
The Citi report comes a few months before December’s crucial United Nations COP21 meeting in Paris. The meeting is seen as hugely significant, with the aim of reaching an agreement to keep global warming below two degrees centigrade.
Channell said he had high hopes for the summit. “What’s so exciting about Paris this year is that it’s the first time that all of the players are arriving with positively aligned intentions, including the big emitters: the US and China, who’ve obviously got their own accord between the two of them.”
He added that there seemed to be “an intention to do something against a backdrop of – certainly post crisis – a broadly improving global economy and public opinion broadly supportive, so I think there’s high hopes.”