Representative image of climate change.
Credit: Pixabay Photo
Humanity largely agrees climate change is an existential threat to civilization. You can bet global leaders will harrumph as much again at the big United Nations climate confab in Dubai this winter. At the same time, these leaders also lavish roughly four times more on the fossil fuels heating the planet than they spend fighting the existential threat. Maybe our priorities are just a bit skewed?
Global investment in climate-related projects averaged nearly $1.3 trillion a year in 2021 and 2022, the nonprofit advisory group Climate Policy Initiative estimated recently, almost double the rate of such spending in 2019 and 2020.Unfortunately, that’s about the extent of the happy takeaways from CPI’s report.
As impressive as $1.3 trillion might sound, it’s still far from the $8.6 trillion CPI estimates will be necessary every year between now and 2030, ramping up to $10 trillion annually through 2050, if we’re to limit global heating to 1.5C above pre-industrial averages and cope with the climate chaos already taking place. That’s a goal world leaders have set, and it’s our best hope of limiting the destruction and misery further heating will cause.
Unfortunately, though we’ve spent 2023 suffering from one climate-fueled disaster after another amid the hottest 12 months in recorded human history, we’re still not treating this as the emergency it is. Climate financing might climb to $1.8 trillion this year, the International Energy Agency estimates. That’s still not enough. Adjusted for inflation, it’s almost unchanged. It’s little more than 1 per cent of global GDP.
In contrast, the world’s governments lavished $7 trillion in implied and explicit subsidies on the fossil-fuel industry in 2022 alone, CPI notes, citing a recent International Monetary Fund study. They devoted $2.2 trillion to military spending that year. In another crisis, the Covid-19 pandemic, governments had little problem helicoptering $11.7 trillion to their citizens to keep them solvent.
Of course, maintaining that level of emergency spending year after year, for decades, is a far tougher political lift when hospitals aren’t overflowing and economies aren’t cratering. CPI estimates we’ll need to invest $266 trillion between now and 2050 to limit and adapt to climate change. That’s not too far from a $200 trillion estimate by Bloomberg NEF, Bloomberg’s clean-energy research team, or a $275 trillion estimate by the consulting firm McKinsey.
Such numbers are so huge they test the brain’s ability to process them. “Eleventy gazillion” sounds almost as believable. But they are pennies compared with the damage that will accumulate if we don’t make these investments. That could amount to $2.3 quadrillion by the end of the century, CPI points out, citing an estimate by the nonprofit group Central Banks and Supervisors Network for Greening the Financial System.
And those quadrillions would just be the direct economic damage of such tangible climate effects as floods, wildfires, droughts, hurricanes, productivity loss and illnesses. They don’t include the destruction wrought by wars, forced migration or biodiversity loss. Hospitals filling and economies cratering could become routine events. Already people are having fewer children because of such worries, according to a new University College London study. Those are millions of workers and consumers who will never be born.
Still, this is not the time to despair about disappointing levels of climate investment but to crow early and often about the economic, social and humanitarian benefits more such investment will bring. The good news is that not all of the investment necessary to fend off a grim future has to be public. High interest rates and inflation have punished the capital-intensive renewable energy sector recently. That has led to selloffs in clean-energy stocks and probably scared away some private investors. But the US government will keep luring those dollars back with legislated incentives. China, the world’s biggest carbon polluter, is also the world’s biggest clean-energy investor.
Though wind and solar power, electric cars, heat pumps and the like have been around a long time, this is still a sector in an awkward adolescence. Such industries tend to travel along an S-shaped curve, meaning they start slowly but enjoy drastic leaps in growth, Sam Butler-Sloss and Kingsmill Bond of the nonprofit advocacy group RMI wrote recently. And it’s a good thing; with flowers blooming in Antarctica and ocean temperatures six standard deviations hotter than the norm, that growth needs to be exponential.
(Full disclosure: CPI and Central Banks and Supervisors Network for Greening the Financial System is partially funded by Bloomberg Philanthropies.)