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How not dealing with climate change is killing our economy

2 July, 2014

The costs of climate change are being hotly debated. Sometimes it seems that the two sides of the argument aren’t even hearing one another. But a series of reports this month make it clearer than ever that inaction on climate change is already damaging our economy and a continued failure to take immediate and dramatic action amounts to economic negligence.

The head-in-the-sands approach

On the one hand we have the business-as-usual crowd, arguing that action to prevent climate change cannot be allowed to cost jobs or slow economic growth. Our Prime Minister exemplified that view recently when he criticized the U.S. regulation of greenhouse gas emissions from coal, implying that President Obama was being disingenuous about their effect:

“No matter what they say, no country is going to take actions that are going to deliberately destroy jobs and growth in their country. We are just a little more frank about that,” the Prime Minister said.

If we’re going to be frank, it’s difficult to square Prime Minister Harper’s view that action on climate change is too costly with his recognition, in 2007, that climate change is “perhaps the biggest threat to confront the future of humanity today.”  However, without endorsing the Prime Minister’s implication that the U.S. regulations are at least partly about appearances, it is worth noting that, despite being applauded by many environmental groups, the U.S. regulations have been criticized as inadequate.

… [P]eel back the numbers and the [Climate Action] plan turns out to be precious little. … Relative to 2030 emissions projected from current trends, the drop in that year’s U.S. CO2 emissions sought by the President is a painfully modest 355 million tonnes (metric tons). That equates to just 7% of total actual emissions from all sources last year (5313 million tonnes).

There is no doubt that business-as-usual arguments have influenced the development of these regulations, and certainly continue to influence U.S. climate politics and debate in very significant ways. Even President Obama has warned the environmental movement against asking too much in the face of economic concerns. Nonetheless, the regulations at least represent a credible step towards achieving its climate goals, which is more than you can say for the Canadian government.

But would climate change regulations “destroy jobs and growth”? Well, there’s no doubt that they might have an impact on the growth of activities that are a major source of greenhouse gases, such as development of Canada’s tar sands (or, if you prefer, oil sands) – to take an example that may well be influencing the Prime Minister’s thinking.

It’s all too easy for politicians to refer to environmental laws as “job-killing” (a charge which is rarely true), but focusing on the jobs and growth of one industry tells us little about how Canada, and the world as a whole, will do if we tackle climate change. 

A series of studies over the past few weeks have made it clear that the costs of climate change on the economy are immense, and that there are major economic benefits – including job creation – to fighting climate change.

This is your economy on greenhouse gases

In the past week or two a number of reports have been released that fundamentally challenge the assumption that climate inaction is good for the economy. On June 16th, Nicholas Stern, arguably the world’s foremost climate economist, released a paper demonstrating that mainstream economic theory dramatically under-estimates the costs of climate change. Dr Stern said:

It is extremely important to understand the severe limitations of standard economic models, such as those cited in the IPCC report, which have made assumptions that simply do not reflect current knowledge about climate change and its potential impacts on the economy. I hope our paper will … help policy-makers and the public to recognise the immensity [of] the potential risks of unmanaged climate change. Models that assume that catastrophic damages are not possible fail to take account of the magnitude of the issues and the implications of the science.

And on June 23rd, the Risky Business Project released their land-mark report, Risky Business, documenting and quantifying – in dollar terms – the costs to the U.S. economy of climate change.  Co-Chair of the project, and former New York City Mayor, Michael Bloomberg, explains:
Damages from storms, flooding, and heat waves are already costing local economies billions of dollars—we saw that firsthand in New York City with Hurricane Sandy. With the oceans rising and the climate changing, the Risky Business report details the costs of inaction in ways that are easy to understand in dollars and cents—and impossible to ignore.

Not to be outdone, David McLaughlin, former President of Canada’s National Roundtable on Environment and the Economy (NRTEE), tweeted that the NRTEE had done much the same thing in its ground-breaking 2010 report, Paying the Price:

We’ve written about Paying the Price before – a report that concluded that climate change will cost Canada $5 Billion per year by 2020, and which was one of the last reports NRTEE released before being disbanded by the current government, apparently in response to their suggestion that a price on carbon should be implemented.

Finally, it is worth noting the Natural Resources Canada report, Canada in a Changing Climate, was quietly released (without a press conference or other announcement) on Wednesday, June 25th, documenting the current and expected impacts of climate change on Canada, and several of Canada’s economic sectors. 

In addition to impacts on the natural environment, changing climate is affecting many of Canada’s economic sectors as well as human health. This includes impacts on sectors with obvious climate sensitivities such as forestry, agriculture, fisheries, hydroelectricity, transportation, tourism and insurance. … Health impacts include lengthening of the ragweed season (between 1995 and 2009, the season increased by more than 25 days in Saskatoon and Winnipeg and spreading of Lyme disease vectors (ticks), which has resulted in the annual number of Canadian cases increasing from 30 to more than 250 in recent years. …

Together, these observed impacts illustrate that climate change is happening now, with impacts being felt across the country. While climate is one of several contributing factors in most cases, these examples provide an indication of the types of impacts that we can expect to see more of as the climate continues to change.

While the report describes a range of specific impacts and case studies, it does not attempt to attach over-all dollar estimates to the damages that are expected (unlike NRTEE’s Paying the Price or Risky Business). This is not uncommon for climate reports of this type – the Intergovernmental Panel on Climate Change report (Climate change 2014: Impacts, adaptation and vulnerability) released in March documenting current and future climate damages also did not generally attach dollar values. However, when politicians insist that doing nothing makes good economic sense, it is unfortunate that the economic cost of their folly is not better documented. 

Nonetheless, Canada in a Changing Climate does provide this useful and impressive graphic that emphasizes the damage that Canada has already suffered from extreme weather events. 

Of course, Prime Minister Harper might argue that this type of climate damage is occurring because of a global problem – and not (just) because of Canada’s inaction on climate change. But he’s still assuming that action on climate change will cost jobs. 

Growing the economy through climate action

This past week also saw the World Bank predicting that tackling climate change could be an engine that helps grow the global economy:

Tuesday's report found a number of key policies … would lead to global GDP gains of between $1.8tn and $2.6tn a year by 2030, in terms of new jobs, increased crop productivity and public health benefits. … The pro-climate regulations and tax incentives would also on their own deliver nearly a third of the reductions in greenhouse gas emissions needed to keep warming below the 2C threshold for dangerous climate change, the bank said.

The World Bank president, Jim Yong Kim, said the findings put to rest claims that the world could not afford to act on climate change. … “These policies make economic sense,” Kim said in a conference call with reporters. “This report removes another false barrier, another false argument not to take action against climate change.”

The basic conclusion is similar to that reached in a 2012 report focused on job creation in Canada. The Blue Green Alliance’s More Bang for our Buck concluded that shifting government subsidies away from fossil fuel companies and to clean energy, energy efficiency and public transport would create thousands more jobs (hat tip to Politics Respun blog):

Analysis presented in this report shows 6-8 times more jobs could be created by investments in renewable energy, energy efficiency or public transit compared with similar investments in the oil and gas industry. … For a tangible example of how Canada can choose a different path, we looked at the $1.3 billion of taxpayers’ money the federal government gives to oil and gas companies each year in the form of subsidies. We asked what if, instead of investing that money in polluting forms of energy, the government invested that money in industries that could reduce pollution? … [I]n each scenario [examined], between 18,000-20,000 jobs could be created. By comparison, according to government estimates, 2,340-2,860 jobs can be generated with $1.3 billion invested in oil and gas production, refining or pipelines.

It should be noted that in the World Bank report the “key policies” were nation-level projects aimed at building low carbon infrastructure, while in Blue Green Alliance report considered shifting government subsidies from the fossil fuel industry to clean energy. Neither of the reports directly looked at a carbon price – a key recommendation of many economists and environmentalists, and a bugbear to the current Canadian government. That being said, there is a growing body of evidence that BC’s carbon tax has not hurt the province’s economy either.

Choose jobs and the environment

Prime Minister Harper may believe that strong policies that address climate change will hurt jobs. If so, he is wrong. A growing body of evidence shows that addressing climate change not only saves Canadians from real financial loss, but also creates jobs and economic opportunities.  
Climate action works for both this generation and for future generations. But it needs to start now.

By Andrew Gage, Staff Lawyer