The Rising Cost of Inaction

The Rising Cost of Inaction

Charlie Spencer
January 12, 2023
The Cliffs Notes
(don't have time to read a long article? Here's the summary of what we're trying to say)
·       Unchecked climate change could cost the global economy US$178 trillion in net present value terms from 2021-2070
·       Multiple comprehensive studies from reputable organisations including HM Treasury, Stanford, Harvard and the Deloitte Centre show that addressing climate change is cheaper and more beneficial to the economy than taking no action, and the longer we wait, the more expensive it gets
·       Based on historical performance, we cannot wait for governments to address climate change - our holy grail is to find climate solutions that are economically favourable today without subsidy – we have to make people WANT to pay through economic reward – and it’s innovators in industry (such as ourselves) that must achieve this 

Whenever we talk about new ideas to tackle climate change, we're always asked the same question - who's going to pay? It's a fair question - a lot of the solutions being considered require industry wide change with massive upfront investment in new technology and infrastructure.

But there exists a more important question. Who is going to pay if we don't stop climate change?

It's currently estimated that for every tonne of carbon emitted, there's an unpaid direct negative economic impact,  and the price tag is anywhere from $185 to $3000 per tonne. These unpaid costs come in many forms, from increased health care costs due to pollution (it's currently estimated 6.7 million people die prematurely each year due to air pollution) to logistics chains being disrupted due to climate related weather events (one report notes climate change impacts could cost the shipping industry an additional $25 billion every year by 2100)

If you take the low end of the scale and state that there is currently an unpaid climate change impact of $185 per tonne of CO2, and given that in 2021 anthropogenic (from human activity) fossil CO2 emissions totalled 37.9 giga tonnes, then there was unpaid damage of $7 trillion to the global economy due to the adverse effects of CO2 emissions – greater than the entire US budget expenditure for the same year. All this is occurring, while explicit fossil fuel subsidies (money given by government to help reduce the price of fossil fuels) totalled nearly half a trillion the year prior.

Several organisations have performed cost benefit analysis for wide scale measures to address climate change - while the numbers vary, they all have one thing in common. Taking action now is significantly cheaper than kicking the can down the road, and could even lead to direct economic gains versus taking no action.

  • The 2022 report "The turning point" by the Deloitte Centre for Sustainable Progress notes that "unchecked climate change could cost the global economy US$178 trillion in net present value terms from 2021-2070" with a far greater human cost, while rapid action towards net-zero could lead to a US$43 trillion increase in net present value terms from 2021-2070
  • The 2018 New Climate Energy Report by the Global Commission on the Economy and Climate states that bold action could yield a direct economic gain of US$26 trillion through to 2030 compared with business-as-usual. And this is likely to be a conservative estimate
  • All the way back in 2014 the US Council of Economic Advisers even noted that "Immediate action substantially reduces the cost of achieving climate targets"
  • Further reports can be found at the bottom of this blog post

The list of reports goes on, but the underlying message is the same - the bill for not addressing climate change is getting larger every day, and significant reward exists for those that act sooner.

So why are we not doing more to address climate change? Typically for broad scale infrastructure change, we have looked to the government for impetus. Government activity in relation to addressing climate change can best be observed at the annual Conference of Party meetings (COP - we're now on number 27). Based on the progress of COP meetings to date, it's safe to say that our governments do not feel they will be held accountable for a lack of progress. Since the first "Framework Convention on Climate Change" (UNFCCC, before it became COP) in 1992 they have established:

  • The Kyoto protocol, which while a noble intentioned effort, omitted China and the USA, and who's only penalties for failure were naming and shaming, and telling the world how you were going to do better next time (promise). It could also be circumvented (and was, cough Canada??) by simply withdrawing from the agreement
  • The Paris Agreement, which set a goal to limit global warming to "significantly below" 2 degrees Celsius - but again lacks any penalties such as fees or embargoes for parties that violate its terms, leading some experts to argue that it is in fact not a legally binding document at all. Again, as we saw with the USA this time, countries can also simply withdraw if they fear they will miss targets
  • Various formations of "decision making" bodies, "action proclamations" and rulebooks
  • An agreement that richer countries will establish a fund to help developing countries affected by climate change - though I wouldn't feel too comfortable as a developing country yet, since the first target is to spend a year deliberating what form the fund should take, and who should contribute…

Condensed down, this means after 31 years of meetings… we still have nothing that is truly a legally binding, uncircumventable framework that will hold countries and businesses to account for climate change. Quite the opposite has taken place, with explicit fossil fuel subsidies from governments increasing in the years following the 2015 Paris accord, nearly reaching a staggering $1 trillion in 2018 before stagnating at around half a trillion per annum since.

So where are the adults that are responsible for mitigating this situation before we default on the climate bill? Shock, horror, it's you. It's all of us. We cannot trust our governments to take the rapid (and admittedly expensive) action necessary to prevent climate change ruining the economy, and for that matter, life as we know it.

If you google what can I do to help climate change, you'll see plenty of articles about flying and driving less, going vegetarian, insulating your house and responsible investment - and you should definitely do all of these things if you can - but with the current false economy that props up fossil fuels it’s doubtful that these actions will or can be adopted by a large enough portion of the world’s population to effect real change.

We can't wait for carbon taxes to become universal and legally enforced by government, so we need to find ways of implementing climate solutions that are economically favourable today. Based on the often negative media (and the far worse effects of misinformation through social media), it seems implausible to many - but the truth is that change is already happening. Solar panels, wind farms, electric vehicles - they have all reached a point where they are the more economically favourable solution - in many cases even factoring in the subsidies afforded to fossil fuels.

At Spaera we want to present a similar value proposition for maritime. We want you to have your cake and eat it. A propulsion system that beats the status quo fuel options on economics, and does it within a zero harmful emission lifecycle. Better stop writing blogs and get back to work…

Climate Change Impact Economic Analyses

"Unchecked climate change could cost the global economy US$178 trillion in net present value terms from 2021-2070" with a far greater human cost, while rapid action towards net-zero could lead to a US$43trillion increase in net present value terms from 2021-2070 - $221 trillion Saved by 2070


$62 trillion investment to switch 145 countries to entirely renewable energy, which would save $11 trillion per year thereafter in fuel costs, so full payback in 6 years, with massive further benefits to the economy and environment  - $11 trillion saved per year post $62 trillion investment 

“bold action could yield a direct economic gain of US$26trillion through to 2030” - $26 trillion saved by 2030

Energy Infrastructure & Fuel Costs in a "no action" scenario amount to 192 trillion, with climate change impacts set to cause a 72 trillion loss in economic activity. The action scenario of addressing climate change is predicted to cost 190 trillion (2 trillion LESS than taking action, thanks to avoided fuel use) and will avoid the 72 trillion loss in economic activity - $74 Trillion Saved by 2060

Climate change stemming from delayed action creates large estimatedeconomic damages. If delayed action causes the mean global temperature increase to stabilize at 3° Celsius above pre-industrial levels, instead of 2°, that delay will induce annual additional damages of 0.9 percent of global output. To put this percentage in perspective, 0.9 percent of estimated 2014 U.S. GDP is approximately $150 billion - US Economic damages of >$150 billion annually from unchecked climate change

Unabated climate change could cost the world at least 5% of GDP each year; if more dramatic predictions come to pass, the cost could bemore than 20% of GDP. The cost of reducing emissions could be limited to around 1% of global GDP; people could be charged more for carbon-intensive goods. Shifting the world onto a low-carbon path could eventually benefit the economy by $2.5 trillion a year - Low carbon path could benefit economy by $2.5 trillion a year