BJORN LOMBORG: What climate spending really costs the world

Across the world, public finances are stretched dangerously thin. Per capita growth continues to drop, while costs for pensions, education, healthcare and defence climb.

These urgent priorities could easily require an additional 3%-6% of GDP. Yet green campaigners are loudly calling for governments to spend up to 25% of GDP choking growth in the name of climate change.

If a climate Armageddon were imminent, they would have a point. The truth is far more prosaic. Two major scientific estimates of the total global cost of climate change have been published recently. These are not individual studies, which can vary (with the costliest studies getting copious press coverage). Instead, they are meta-studies based on the entirety of the peer-reviewed literature. One is authored by one of the most cited climate economists, Richard Tol; the other is by the only climate economist to win the Nobel prize, William Nordhaus.

The studies suggest a 3°C temperature increase by the end of the century — slightly pessimistic based on current trends — will have a global cost equivalent to 1.9%-3.1% of global GDP. To put this into context, the UN estimates that by the end of the century, the average person will be 450% as rich as he or she is today. Because of climate change, it will feel like “only” 435%-440% as rich as today.

Why is this so different from the impression we have been given in the media? Alarmist campaigners and credulous journalists fail to account for the simple fact that people are remarkably adaptable and tackle most climate problems at low cost. Take food: climate campaigners warn that we’ll starve, but research shows that instead of a 51% increase in food availability by 2100 if there were no climate change, we are on track for “only a 49% increase”.

Or weather disasters: they killed half a million people annually in the 1920s, whereas the past decade saw fewer than 9,000 fatalities on average each year. The 97.5% reduction in mortality is because people are more resilient when they’re richer and can access better technology.

Extremist climate campaigners and far-left politicians reveal their true colours when they push for “degrowth” to cut emissions. Making people worse off and reversing gains against extreme poverty would be a tragic mistake, making it harder to address all our other problems. Moreover, it is laughable to envision that the West’s strategic adversaries, such as Vladimir Putin, will embrace a similar approach.

More responsible politicians “only” want to achieve net-zero carbon emissions by 2050. But this approach still means slowing growth in the name of climate change by forcing businesses and individuals to use less-efficient green energy instead of fossil fuels. The total costs would be enormous — $15-trillion to $37-trillion each year throughout the century, equivalent to 15%-37% of global GDP today.

Given that wealthier Organisation for Economic Co-operation and Development (OECD) countries will foot most of this bill, the price tag will be the equivalent to each person in the rich world paying north of $10,000 every year. Not only will this be politically impossible, but the benefit will be a far smaller 1% of GDP across the century.

The real cost of inefficient climate policy is that it distracts resources and attention from other priorities. Europe offers an abject lesson. Twenty-five years ago, the EU proclaimed that with huge investments in R&D throughout the economy it would become “the most competitive and the most dynamic knowledge-based economy in the world”. It abjectly failed: innovation spending hardly budged and the EU is now far behind the US, South Korea and even China.

Instead, the EU switched focus and, with a near-myopic climate obsession, opted for a “sustainable” economy over a sound one. The EU’s decision to increase its 2030 emission reduction targets was pure virtue signalling. The cost is likely to top several trillion euros, yet the entire effort will merely reduce temperatures by the end of the century by a trivial 0.004°C.

Not focusing on innovation has stunted Europe. The euro area has seen anaemic annual per capita growth over the past decade of just more than 1%. For the €2-trillion it has spent on symbolic climate policy, the EU could have lived up to its own innovation spending targets for two decades.

Investment in innovation could have made the EU and the world €60-trillion richer in the long run, generating 500-times more benefits than its symbolic climate policy benefits. Crucially, it would have allowed the EU more leeway to tackle other key challenges, such as pension shortfalls and deficiencies in education, healthcare and defence.

The rest of the world needs to pay heed to Europe’s example, and stop wasting money on bad climate policies.

• Lomborg is president of the Copenhagen Consensus, visiting fellow at Stanford University’s Hoover Institution and author of ‘False Alarm’ and ‘Best Things First’.