As we ease out of a serious recession it is becoming apparent that if we are to afford the costs of managing climate change the global economy must grow. The estimates of the cost of a global deal on climate change varies from less than $200 billion a year to over half a trillion dollars.
In September the WWF called on G20 finance ministers to commit to providing $160 billion per year to help the world's developing nations to adapt to climate change and work towards a low carbon economy. These funds are in addition to both Overseas Development Assistance and carbon market finance. The 2009 Davos Forum forecast that world needs will average $515 billion a year through 2010-2020.
The debt and finance sector crisis of 2007-2008 led to the most massive government spending in human history. The cost of the banking and financial meltdown was approximately 4 trillion dollars or roughly 10 percent of Organisation for Economic Co-operation and Development (OECD) GNP.
The plans put forth to combat climate change at COP15 will increase short-term spending, and borrowing requirements. By some estimates, climate change mitigation and energy transition spending by the OECD group between 2010 and 2020, could attain a cumulative total of $4 to $6 trillion. Already struggling with unnprecedented levels of deficit spending, governments around the world are understandably concerned about incurring more debt.
Although it is expected that wealthier nations will pay the lion's share of this amount, there is considerable disagreement about where this money will come from and this is one of the key issues impeding progress ahead of COP15. As the world strives to develop a formula to pay for global climate change mitigation, finance ministers acknowledge that only economic growth will enable them to address mounting government deficits.
Electric vehicles, renewable energy, smart grid, agriculture and transport will all require heavy spending. Over half of total climate change mitigation money will go to the energy and transport sectors. Energy alone may cost as much as $300 billion in a couple of years. To put this into perspective the global oil and gas industry spent approximately $400 billion in 2007.
Despite legitimate concerns about deficits, energy inflation and energy price volatility, G20 leaders continue to indicate their willingness to accelerate the shift to a low carbon economy. World leaders acknowledge that managing climate change is not a choice it is an imperative.
The Obama Administration is trying to come up with a reliable economic estimate of the cost of unchecked climate change, but quantifying inaction is difficult. How do you quantify harm to future generations or catastrophic risk?
According to a report entitled, "Climate Change in the United States: The Prohibitive Costs of Inaction," Unchecked climate change could cost taxpayers, businesses and governments hundreds of billions of dollars in damages accross the US. The cost of doing nothing is far greater than the costs of a binding agreement on climate change.
For years before the banking and financial crisis, the cost of managing climate change was considered too high. However the cost of doing nothing threatens not only our economic system but our very survival.
Cost is not a valid excuse for resisting efforts to manage climate change but the astronomical costs of unchecked climate change are an impetus to act.
There will be major challenges in finance and resources, but managing climate change demands long-term government involvement in the economy. Contrary to the conservative views of those mired in old paradigms, this is not a socialist call to arms. We are tasked to marshall all the capitalistic creativity we can muster because this level of public spending can only be sustained by significant economic growth.
Obama's Achievements Ahead of COP15
Cop Out for COP15
Boxer-Kerry Climate Change Bill
China is Showing Leadership America Must Follow
EPA's Proposed Rule to Regulate Emissions
The State of Climate Change Negotiations
Global Cooperation Ahead of COP 15
Climate Change Optimism
Steven Chu: The Fierce Urgency of Now
Action on Climate Change
Green Stimulus and Free Markets
Green Stimulus Spending and Republican Opposition
China's Green Stimulus, US/China Cooperation and Economic Recovery
US Government Spending and Energy Efficiency Stock
Investing for a Sustainable Recovery
Green Stimulus' Basic Elements
Helping Small Business Accept US Cap-and-Trade
Cap-and-Trade Implications for Business
Small Business Can Save Cap-and-Trade Legislation
Small Business' Silence on US Cap-and-trade Legislation
US Cap-and-Trade: Business
US Cap-and-Trade: What and Why
US Cap-and-Trade: Solutions
G20 and Developing World Disagree on Climate Change
G20 Lays the Foundation for a Better World
G8's More Aggressive GHG Targets
COP 15 Implications for Business
COP 15 Timetable
United Nations Climate Change Conference