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Macro & Investment Insights

The cost of climate change: Action versus inaction

  • 30 September 2021
  • 10min read

Pricing mitigation efforts and assessing the difficulties of comparison

Key points

  • The present global consensus to reduce greenhouse gas emissions to net zero will require immense investment
  • Investment spending is not a cost but will boost activity. Costs will reflect increased production costs, taxes and regulations associated with reducing emissions
  • A range of supra-national institutions estimate global GDP to be between +2.5% to -2% by 2050 after climate change mitigation actions. The cost of unmitigated climate change is estimated at a larger range of 3% to 30% of global GDP by 2100. The cost of global warming in the most conservative scenario is thus higher than the mitigation cost in the most pessimistic scenario.
  • A comparison of the two is complicated by near-term costs and far-distant benefits. The use of lower discount rates seems appropriate, which adds to arguments for intervention
  • Differences will also occur across geographies, making a global comparison of costs different from individual assessments by countries and regions
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