E3G

Investing in the economics of climate security

By Nick Mabey

The problem for policy-makers

This means that policy makers are left with little useful guidance from the economics literature on the core decision they have to make: how far and fast should we cut global emissions?

If we were to accept the need to stabilise emissions at 450ppm, this would require much faster investment in low carbon energy sources in the next 25 years. Investment would have to prevent lock-in to high carbon power infrastructure.

This would also require a far more aggressive and interventionist approach by policy makers to the research, development and deployment of new technologies over the next 5-15 years. For if these investments are not made soon, then there will be no chance of avoiding high risks of catastrophic climate change impacts.

So there is a real choice as to how much “climate insurance” we should buy. Achieving a 2°C world requires radical action in the next decade to shift private sector investment patterns, and substantial public investment in the acceleration of large scale zero-carbon technologies.

This is not just an economic choice but a security choice as well. If we fail to drive transformation quickly enough we would have no ability to correct our mistake. For a high-carbon infrastructure cannot be dismantled overnight without prohibitive cost. Similarly, we cannot suck carbon from the atmosphere at scale.

Conclusion

The challenge for the economics of climate change is to assess the costs of catastrophic climatic and social disruption against the costs of shifting decisively to a low carbon economy over the next decades. Uncertainty abounds over any choice. But this is a risk management decision – not a quest for truth.

However, the critical point to remember is that while we can always reverse our choices to invest in a low carbon future; once we have passed the critical climate change tipping points we can never regain our climate security.

The economic study of climate change must reflect these realities if it is to provide any useful guidance on policy choices.

Nick Mabey is Chief Executive of E3G. He was an expert reviewer of Working Group III of the Third IPCC Assessment report and was lead author of the book “Argument in the Greenhouse: the international economics of controlling global warming” based on his research at London Business School.