Climate and the economy

In the ever-changing world, a key issue faced by world leaders is how to tackle climate change. Several targets have been set – one notable one being at the Paris Climate Accords of 2015 – aiming to global warming to below 2 degrees Celsius compared to the global levels pre- industrialisation. But is this viable? Will come at a large cost? The cost ahead leaves the question of whether significant change will be enacted, and if it’ll be on time.

One of the biggest issues with tackling climate change is the high initial cost. This can be broken down into several factors, with large industries largely dependant on oil production (such as transport and energy industries) and countries that make huge profits from oil production. According to the International Energy Statistics, the United States was producing 18.6 million barrels of oil per day in 2020 – 20% of the world total. For real change, such a global superpower would need to be more involved, and the 4-year break taken from such negotiations under President Trump hasn’t helped the situation.
The US has since re-joined the Paris Climate Accords under President Biden and has its target for the climate with a net-zero target of 2050 but with all the profits in the industry, and what is in effect, a very profit-driven country the question of whether they will hit this is very open, especially if there were to be another President in the future who won’t negotiate over climate matters.

Bringing the focus back to the United Kingdom, the Committee on Climate Change (CCC) predict that the costs of reaching net-zero by 2050 would be on average less than 1% of GDP for every year up to 2050, which pales in comparison to the military budget of around 2% per year. However, the CCC has also estimated that green investment would need to increase rapidly through 2020-30, to around £50 billion a year – more than 2% of U.K. GDP. As with any disparity in figures, this will pose a difficult question for any U.K. government, especially due to the uniqueness of the situation. At the same time, the crisis makes a budget deficit seem somewhat likely due to the effects of COVID 19 (debt of 103.6% of GDP at the end of the financial year that ended in March 2021) very much on the government’s mind. As a result, it seems unlikely environmental investment is coming anytime soon.

The COVID 19 pandemic also created a unique situation, with millions of drivers off the road, causing a temporary reduction in greenhouse gas emissions and air pollution, with estimates that global CO2 emissions reduced by 8.8% in the first five months of 2020. But the costs don’t go without huge benefits that should affect everyone on the planet. By bringing down the levels of pollution in the air people will be breathing in less pollution, leading to a healthier population reducing the costs of health services such as the NHS. If individuals can be convinced to change diets, consuming less red meat, this could also hugely influence the climate. This is because methane production greatly impacts the atmosphere, with the UNECE estimating that over 20 years, the potential for methane to influence global warming is over 80% more than CO2.

Livestock accounts for 27% of methane production, with fossil fuels taking up an even greater percentage at 33%. In terms of seeing an effect with climate policies, it is clear that reducing the methane in the atmosphere will greatly reduce some of the visible effects of global warming much quicker. Adding to this, the Organisation for Economic Co-operation and Development (OECD) estimate that if countries take action against climate change 5% could be added to GDP by 2050 due to the reduced costs of dealing with the extreme weather events caused by climate change.

There are other highly influential non-economic effects of climate change, with the extinction of entire species likely, and living conditions likely to worsen should not enough change happen. It is clear that more drastic action is needed, with investment into renewable energies and new eco-friendly industries crucial. Large targets have been set, but whether the countries required to do this have the means to enact global positive change will is the real question. Should it not be in the interest of many large and profitable industries? Such industries that can use their power to influence policy for action to be taken? Is it likely that we will see the changes necessary? And does that make the future of the world depend on how well industries can transition to renewable energies? I hope not.