US dragging feet in climate fight offers SA costly lessons
SA must jump into action to avert climatic shocks as the average annual cost of US weather disasters soars
Though inaction against climate change may seem the best option to buoy short-term growth, the US economy shows the inevitable failure of this approach.
It was nearly 25 years ago that US treasury secretary Janet Yellen began working on climate change while advising then president Bill Clinton before the 1997 Kyoto Conference of Parties. She said that climate change should be a national priority and inaction would be costly. American policymakers failed to heed her call to action.
It took decades before progress was made. Joe Biden is the first US president to make climate reform a centrepiece of his administration. From his first day in office he committed himself to helping America reach net-zero emissions by 2050 and announced a $800bn package to fight climate change, including investments in clean energy.
The decades-long delay stems from the lack of sufficient understanding of the magnitude of the trade-offs. Climate change always sounded futuristic — and futurism does not bode well for election cycles. While not closing coal mines in Wyoming and West Virginia averted short-term job losses, the long-term cost of inaction proved to be far worse.
Using the consumer price index to adjust all direct costs to 2019 dollars, there have been 258 events in the US that cost more than $1bn each since 1980, with a total cost of more than $1.75-trillion. These have occurred with increasing frequency. In the 1980s, there was an average of three $1bn-plus disasters per year. By 2010, this had increased to 12. This came with skyrocketing costs — the average annual cost of disasters in the 1980s was $17bn, and since 2010 this rose 400% to $84bn.
Yellen recently noted that climate change is now “an existential risk to our future economy and way of life”. Research by the Environmental Defense Fund shows the severity, frequency and cost of extreme weather will get worse. In the US, inaction will lead to up to 70 more extreme heat days a year in the southwest, a sixfold increase in acres burnt by wildfires in the west, and a 45% increase in category 4 and 5 hurricanes in the Atlantic basin by 2050.
The delay in action — from Yellen’s call for action in the 1990s to becoming secretary of the US treasury in 2021 — is not uncommon when it comes to social and economic development urgencies.
In 1993, Hillary Clinton developed a plan that would have provided universal health care for all Americans but it was defeated, in no small part due to a strong health-care lobby. Critics argued that universal health care coverage would cost the US too much. But the US was already spending more than any other country in the world on health-care expenses — 15% of GDP — despite being ranked 37th globally for quality of health care delivered.
The status quo of millions of uninsured Americans was maintained until Barack Obama took office. In 2010 — 17 years after Clinton tried to pass universal health care — the Affordable Care Act (Obamacare) was signed into law, providing affordable health care coverage for all Americans. Again, the cost of the delay was substantial. Research published in the American Journal of Medicine showed that health-care expenses were the most common cause of bankruptcies and increased substantially over time, from 8% in 1981 to a whopping 62% in 2007.
What can SA learn from the American experience? Change is urgently needed. About 91% of SA’s energy comes from coal-fired power stations. In 2020, though SA NGOs won two important legal battles to block the construction of the Khanyisa and Thabametsi coal-fired power stations, these are just two of 14 new power plants proposed under the Coal Baseload Independent Power Producer Procurement Programme — and Eskom already owns and operates 12 coal-fired power plants.
The cost of inaction is steep. Recently published research shows that a future scenario with severe climate change could translate to a 20% decline in SA’s GDP per capita by the end of the century. Already climatic shocks have proven costly. In March 2020 a second national state of disaster for drought was declared within three years after multiple provincial states of disaster. In the past five years nationwide droughts, coastal floods and ravaging wildfires have cost the fiscus billions of rand.
SA is at a critical juncture, and the US is a reminder that acting in a short-sighted manner can cause irrecoverable economic losses both in the present and for centuries to come. Short-sightedness does not favour economic growth or environmental sustainability.
• Dr Baskaran (@gracebaskaran), a development economist, is senior research fellow at the University of Cape Town’s Development Policy Research Unit.
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