Delaying climate policy would triple short-term mitigation costs

Further delay in the implementation of comprehensive international climate policies could substantially increase the short-term costs of climate change mitigation.

Global economic growth would be cut back by up to 7 percent within the first decade after climate policy implementation if the current international stalemate is continued until 2030 – compared to 2 percent if a climate agreement is reached by 2015 already, a study to be published next tuesday by scientists of the Potsdam Institute for Climate Impact Research (PIK) shows. Higher costs would in turn increase the threshold for decision-makers to start the transition to a low-carbon economy. Thus, to keep climate targets within reach it seems to be most relevant to not further postpone mitigation, the researchers conclude.

“The transitional economic repercussions that would result if the switch towards a climate-friendly economy is delayed, are comparable to the costs of the financial crisis the world just experienced,” lead-author Gunnar Luderer says. The later climate policy implementation starts, the faster – hence the more expensive – emissions have to be reduced if states world-wide want to achieve the internationally agreed target of limiting global warming to 2 degrees above pre-industrial levels. A binding global agreement to implement the emissions reductions required to reach this target is currently still under negotiation, while global emissions have continued to rise.

“For the first time, our study quantifies the short-term costs of tiptoeing when confronted with the climate challenge,” Luderer says. “Economists tend to look at how things balance out in the long-term, but decision-makers understandably worry about additional burdens for the people and businesses they are responsible for right now. So increased short-term costs due to delaying climate policy might deter decision-makers from starting the transformation. The initial costs of climate policies thus can be more relevant than the total costs.”

Future energy price increases could be limited

The researchers investigated a number of cost dimensions, including climate policy effects on energy prices. If emissions reductions are delayed beyond 2030, global energy price levels are likely to increase by 80 percent in the short term. Such price increases are of particular concern because of the burden they put on the world’s poor. In the past, comparable energy price increases in developing countries have resulted in massive public opposition and social unrest, like in Indonesia in 1998 after a cutback of fuel subsidies. If an agreement on emissions reductions compatible with the 2 degree target is reached until 2015, short-term energy price increases could be limited to 25 percent.

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