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IPCC: the cost of stopping climate change

Céline Guivarch
Céline Guivarch
Chief Engineer at CIRED and Lead Author of the 6th IPCC report
Key takeaways
  • Over the last decade, the costs of climate change mitigation options have fallen drastically. For example, installing a new solar panel costs about 10 times less than it did ten years ago
  • Models that take into account the economic damage of climate change find that limiting warming to 2°C over the 21st Century promises lower global economic benefits than reducing warming.
  • Climate change impacts lead to increased inequality and therefore pose a threat to poverty eradication.
  • The chances of achieving equitable and effective policies are higher if different actors, such as citizens and businesses, are broadly engaged from the beginning of policy design.

How much will it cost to mitigate climate change to meet the goals of the Paris Agreement?

Celine Guiv­arch. Less than before. Poli­cies and mea­sures put in place over recent years have pushed the deploy­ment of pos­si­ble solu­tions, which in turn has forced costs down. As a result, the evi­dence shows that the cost of some mit­i­ga­tion options has fall­en dra­mat­i­cal­ly in the past decade. For exam­ple, the cost of installing new solar has been divid­ed by almost 10 times over the past 10 years. In many regions of the world solar pow­er is eco­nom­i­cal­ly com­pet­i­tive with fos­sil fuels now 1. Then there are mit­i­ga­tion options, which  include trans­for­ma­tions in infra­struc­ture to shift from cars to pub­lic trans­porta­tion, bikes, walk­ing and so on. What the report shows is that the eco­nom­ic ben­e­fit is seen over the life­time of a dif­fer­ent option, so it makes eco­nom­ic sense to shift 2

The lit­er­a­ture on macro­eco­nom­ics shows that the cost of mit­i­ga­tion is low­er than the cost of inac­tion, in part because the cost of inac­tion means bear­ing the impacts. The report states, “mod­els that incor­po­rate the eco­nom­ic dam­ages from cli­mate change find that the glob­al cost of lim­it­ing warm­ing to 2°C over the 21st Cen­tu­ry is low­er than the glob­al eco­nom­ic ben­e­fits of reduc­ing warm­ing, unless: i) cli­mate dam­ages are towards the low end of the range; or, ii) future dam­ages are dis­count­ed at high rates (medi­um confidence)”. 

Oth­er ben­e­fits that aren’t includ­ed in either the option or the macro­eco­nom­ic lev­el are health improve­ments. For exam­ple, if you reduce fos­sil fuel use, you reduce CO2 emis­sions and you also reduce local pol­lu­tants and some par­tic­u­late mat­ter that cause indoor pol­lu­tion and air pol­lu­tion in cities. Such action there­fore improves the qual­i­ty of the air we breathe and reduces impacts on asth­ma and oth­er health issues. The mon­e­tary val­ue of these ben­e­fits is extreme­ly high, improv­ing the health and well-being of people.

But while we know that ambi­tious action to reduce emis­sions makes sense from an eco­nom­ic point of view, the lit­er­a­ture is clear that it will not be easy. There are many bar­ri­ers to mit­i­ga­tion action; finan­cial, insti­tu­tion­al, or even infra­struc­tur­al, such as cur­rent sys­tems that locks in the use of fos­sil fuel. Even when the aggre­gate cost-ben­e­fit is favor­able, there is still the ques­tion of who will bear the cost, who stands to ben­e­fit, dis­tri­b­u­tion of the cost, the “just tran­si­tion” at all scales, between coun­tries, but also with­in coun­tries and communities.

The assess­ment shows that if we keep using exist­ing fos­sil fuel infra­struc­ture and main­tain cur­rent con­struc­tion and esti­mate their emis­sions to the end of their tech­ni­cal life, then we would have exhaust­ed the car­bon bud­get com­pat­i­ble with lim­it­ing glob­al warm­ing to 1.5°C 3

We know what to do, and we understand the economic case for rapid and ambitious action, yet a finance and investment gap for the transition persists. Why?

The report looks at actu­al invest­ments at the glob­al lev­el, and avail­able cap­i­tal. It shows that find­ing more cap­i­tal to invest is not the prob­lem, but rather of chan­nel­ing invest­ment towards mit­i­ga­tion solu­tions is. That gap between invest­ment flows and needs ranges from a fac­tor of 2 to 6, 4 depend­ing on which region and which sec­tor, and that gap is big­ger in devel­op­ing coun­tries, and in the land-use and agri­cul­ture sec­tor. To close that gap, we need poli­cies that sig­nal that we will make a fast and deep tran­si­tion away from fos­sil fuels. The lit­er­a­ture shows that what is need­ed is a pack­age of pol­i­cy instru­ments, coor­di­nat­ed at dif­fer­ent scales, from the ter­ri­to­r­i­al, to the region­al, the nation­al, the Euro­pean and the glob­al scale. And it is real­ly a ques­tion of coor­di­na­tion so that all sig­nals are aligned.

That includes fis­cal ele­ments, but also reg­u­la­to­ry pol­i­cy instru­ments on tech­ni­cal reg­u­la­tions for vehi­cles, build­ings, indus­tri­al goods, as well as urban plan­ning to ensure that afford­able hous­ing is avail­able not too far from job cen­tres. The idea is not to focus exclu­sive­ly on cli­mate-cen­tric poli­cies, but rather to change the con­di­tions in which mit­i­ga­tion can happen.

What about the ecological transition and inequalities?

One of the main themes of the report relates to impli­ca­tions of mit­i­ga­tion options on oth­er dimen­sions of sus­tain­able devel­op­ment: pover­ty erad­i­ca­tion and reduc­tion in inequal­i­ties are sys­tem­at­i­cal­ly assessed for instance. A very strong mes­sage from Work­ing Group 2 (on impacts, vul­ner­a­bil­i­ty and adap­ta­tion) is that impacts from cli­mate change dis­pro­por­tion­ate­ly affect the most vul­ner­a­ble coun­tries and pop­u­la­tions. And that impacts of cli­mate change dri­ve increas­es in inequal­i­ties and are a threat to pover­ty erad­i­ca­tion. So real­ly through avoid­ing impacts, mit­i­ga­tion is reduc­ing eco­nom­ic inequal­i­ties and that is a high con­fi­dence finding.

The lit­er­a­ture also shows that mit­i­ga­tion can either reduce or increase income inequal­i­ties and pover­ty, depend­ing on the pol­i­cy instru­ments, design, and imple­men­ta­tion. For exam­ple, there is not one sin­gle way to design a car­bon tax. Depend­ing on how the rev­enue is used, the dis­trib­u­tive impact of the fis­cal action can go in both direc­tions. There­fore, explic­it atten­tion to equi­ty and jus­tice at all scales, from design to imple­men­ta­tion, is impor­tant for both social accep­tance of poli­cies and their dis­trib­u­tive impact. Fur­ther­more, we know that chances of fair and effec­tive poli­cies are high­er if there is broad engage­ment of dif­fer­ent actors such as cit­i­zens, unions, and busi­ness at the start of pol­i­cy design.

Is capitalism the problem? Can we engineer a transition out of fossil fuels in our current system?

The report goes quite deeply into the ques­tion of the role of demand and suf­fi­cien­cy. Suf­fi­cien­cy means poli­cies, mea­sures and dai­ly prac­tices that avoid demand for ener­gy, mate­ri­als, land, water while deliv­er­ing human well­be­ing for all with­in plan­e­tary bound­aries. For exam­ple, if you avoid trans­port because of remote work­ing, or you don’t heat your offices dur­ing week­ends, or if you decide to heat at 19°C instead of 20°C, that would be sufficiency.

The con­cept of suf­fi­cien­cy in the lit­er­a­ture is strong­ly linked to human well­be­ing with­in plan­e­tary bound­aries, as well as to pover­ty erad­i­ca­tion and reduc­tion of inequal­i­ties. What we know is that mit­i­ga­tion, includ­ing demand-side mit­i­ga­tion, is con­sis­tent with improv­ing well-being for all and, and pro­vid­ing access to basic needs. 

Interview by Denise Young
1https://www.ipcc.ch/report/ar6/wg3/figures/summary-for-policymakers/figure-spm‑3/
2https://www.ipcc.ch/report/ar6/wg3/figures/summary-for-policymakers/figure-spm‑7/
3 https://www.ipcc.ch/sr15/chapter/chapter‑2/2–5/2–5‑2/2–5‑2–1/figure‑2–26/
4https://​report​.ipcc​.ch/​a​r​6​w​g​3​/​p​d​f​/​I​P​C​C​_​A​R​6​_​W​G​I​I​I​_​F​i​n​a​l​D​r​a​f​t​_​T​e​c​h​n​i​c​a​l​S​u​m​m​a​r​y.pdf

Contributors

Céline Guivarch

Céline Guivarch

Chief Engineer at CIRED and Lead Author of the 6th IPCC report

Céline Guivarch leads the “Climate-economy modelling at the global scale” team at CIRED. Her research focuses on both the economic impacts from climate change and the assessment of mitigation pathways. She has worked on the evaluation of climate change mitigation costs, the social cost of carbon, energy efficiency, energy security, energy poverty, and uncertainties in models and decisions. She is also a Lead Author of the Chapter “Mitigation pathways compatible with long-term goals” of the 6th assessment report of the IPCC Working Group III on mitigation. She is a member of the French High council for climate, an independant body assessing government climate policy.