It is often erroneously said that tackling climate change will be expensive. It is true that a global transformation of the energy landscape will involve significant costs. However, the price to society of not urgently embarking on an aggressive emissions reduction program would be far greater than the costs of undertaking one. Every study of this issue has shown that the benefits of strong, early action considerably outweigh the costs.
For example, a 2006 study, led by British economist Lord Nicholas Stern, concluded that the cost of achieving a 2°C target would be about 1 percent of global GDP, five times less than the costs of the climate disruption experienced if we fail to act. If a wider range of risks and impacts is taken into account, the estimates of future climate damages rise to 20 percent of GDP, or trillions each year.
The annual cost of transforming the global energy system would be less than the U.S. now spends on its military, and far smaller than the cost of doing nothing. There is no time to waste. The International Energy Agency has calculated that each year’s delay adds hundreds of billions to the ultimate cost of resolving the climate challenge. That is because the less we do now the more we have to do later, rapidly replacing polluting power plants with newer, cleaner ones. (See top animation.)
Many of the needed investments in energy efficiency will save both money and carbon. For example, a 2008 analysis by McKinsey & Company concluded that nearly 40 percent of the needed emission reductions would save money, as shown in the lower animation. Those savings can offset increased investment in tropical forest preservation, renewable energy, nuclear power, carbon capture and storage, and other more expensive clean energy technologies.