Study: Low carbon transition could save trillions

Low carbon transition

New research shows that transitioning to a low-carbon society could save trillions of dollars. Creative Commons: Chrishna, 2009

Transitioning to a low carbon society will not only prevent the most devastating climate impacts, but could free up trillions of dollars over the next two decades, according to new research.

Two new reports from the Climate Policy Initiative (CPI) reveal that a greener global economy could save around $1.8 trillion between 2015 and 2035.

The first of CPI’s reports addressed the costs of low carbon electricity and transportation systems, while the second focuses on the potential losses incurred by remaining with business as usual, including an assessment of stranded assets – fossil fuels investments that will not see a return as demand falls.

The operational costs involved in the extraction and transportation of fossil fuels exceed the costs of financing renewable energy, the CPI warns, while fossil fuels reserves are likely to continue to loose value as legislation is introduced to cut carbon emissions.

Tom Heller, Executive Director of the Climate Policy Initiative said:

For policymakers around the world wondering whether the transition to a low-carbon economy will help or hurt their countries’ ability to invest for growth, our analysis clearly demonstrates that, for many, the low-carbon transition is a no-brainer. It not only reduces climate risks, its benefits are clear and significant.

It will be governments who suffer most from standing still, according to the analysis. They currently own 50-70% of global oil, gas and coal resources, as well as collecting taxes on those they do not own – putting them most at risk.

But they also have the control over the policy landscape and can maximise the benefits of switching to low carbon electricity.

Cutting coal consumption has the great potential for boosting the environment while loosing the least value, according to the report.

Transitioning away from coal could achieve 80% of emissions reductions while incurring little economic loss.

Policies in the US and Europe combatting air pollution have put these regions on the path towards limiting the risk of future losses in coal plants’ value.

The EU in particularly have little to loose from transitioning away from coal power, with just $3 billion at risk – or around 2% of EU power plant investments in 2011.

However, to limit asset stranding, China and India will need to look for alternatives to the huge investment that is planned in new coal power plants, for example further boosting the countries’ already extensive programmes to accelerate wind and solar power.

Reducing the cost of financing renewable energy will also help significantly lower the cost of the energy transition, according to the researchers.

In the US and Europe for example, expanding and improving financing vehicles to channel funds into clean energy infrastructure could reduce the cost of low-carbon power by 20%.

Meanwhile, in developing countries, long-term, low-cost debt can reduce the cost of low-carbon power by 30%.

David Nelson, Senior Director, Climate Policy Initiative said:

Our analysis reveals that with the right policy choices, over the next twenty years governments can achieve the emissions reductions necessary for a safer, more stable climate and free up trillions for investment in other parts of the economy. This is even before taking into account the environmental and health benefits of reducing emissions.

The report also does not take into consideration the environmental and health benefits of a greener, less polluted world, which has previously been shown to result in significant cost savings.

With global leaders set to meet in Lima next month for the next round of the UN Climate talks – the next step towards agreeing a global climate treaty in 2015 – these latest reports adds further weight to the argument that saving the climate doesn’t have to cost the earth, and leaves them with few excuses not to act.

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