Inaction on climate change will cost the global economy $178 trillion over the next 50 years, enough loss for a 7.6% cut to global GDP in 2070 alone, a new report from the Deloitte Center for Sustainable Progress said Monday.
If global warming — which is already costing the world more in severe storm damage, crop loss, health risks, compromised travel and more — reaches around 3°C toward the century’s end, the toll on human lives could be significant, the consultancy said in its release, timed to the high-profile World Economic Forum underway in Davos, Switzerland.
Plus, instead of investing in new, value-adding innovations and infrastructure, the world’s productive capital would be channeled toward repairing climate damage, the report warned.
Climate-change effects will disproportionately impact the most vulnerable and lead to loss of productivity and employment, food and water scarcity, worsening health and well-being, and ushering in an overall lower standard of living globally, the group said.
Deloitte’s Global Turning Point report is based on research conducted by the Deloitte Economics Institute.
“Will this require a significant investment from the global business community, from governments, from the non-profit sector? Yes. But inaction is a far costlier choice. The data bears that out,” said Deloitte Global CEO Punit Renjen.
There’s also economic upside in bracing what many call the new “Industrial Revolution,” a technology-driven shift to cleaner energy, more efficient manufacturing and smarter food growth. The report analyzed 15 geographies in Asia Pacific, Europe and the Americas, and found that if global leaders unite in a systemic transition to net-zero greenhouse gas emissions, the global economy could see new five-decade gains of $43 trillion — a boost to global GDP of 3.8% in 2070 alone.
By comparison, after rebounding to roughly 5.5% in 2021, global growth is expected to decelerate in 2022 to 4.1 %, reflecting continued COVID-19 flareups, diminished fiscal support and lingering supply bottlenecks.
To realize the full extent of the “new green economy,” governments will need to collaborate closely with the financial services and technology sectors.
According to the Deloitte Economic Institute’s research, collectively pivoting from an economy reliant on fossil fuels
to an economy primarily powered by renewable energy
would spur new sources of growth and job creation. The private sector knows the time has come. Some 89% of C-level executives surveyed by Deloitte agreed there is a “climate emergency.” And nearly 80% consider the globe “at a tipping point” to do something about it.
“‘Our analysis shows that a low-carbon future is not only a societal imperative but an economic one.’”
— Pradeep Philip, Deloitte Economics Institute
For instance, earlier at the Davos meeting private and public-sector interests talked of the carbon capture technology that would allow oil and natural gas
to remain in an energy mix that includes wind, solar, nuclear and hydrogen. The technology snatches pollution at the point of combustion, storing it underground, and sometimes repurposing the carbon byproduct as its own energy source. And it remains controversial, as some staunch environmental groups worry it simply greenlights more fossil fuel drilling. Carbon capture, which has drawn Big Oil investments and venture capital, and has the backing of President Biden and select members of Congress, isn’t yet commercially viable.
“We need a scale up of a factor of 1 million to get to where we need to go. And that means that by 2050, this (carbon dioxide removal technology) needs to be the size of the oil and gas industry,” said Christian Mumenthaler, the group chief executive officer of insurance group Swiss Re, speaking on a panel.
To reach these lofty goals, global cooperation and regulation are vital to setting the stage for a successful transformation, Deloitte said in its report. In the U.S., for instance, regulators are nearing final rules that will require unified, regular reporting on climate-change risks by publicly traded companies. These are rules that some businesses push back on, worried that the broad brush of reporting brings too much burden on smaller companies and will cost consumers more, especially which a push for companies to report emissions throughout a supply chain.
But the Deloitte team says it’s riskier to sit out this transition.
“It’s important that the global economy evolves to meet the challenges of climate change,” said Dr. Pradeep Philip, with Deloitte Economics Institute. “Our analysis shows that a low-carbon future is not only a societal imperative but an economic one. We already have the technologies, business models and policy approaches to simultaneously combat the climate crisis and unlock significant economic growth, but we need governments, businesses and communities globally to align on a pathway toward a net-zero future.”
The report details four key stages for decarbonization globally:
The public and private sectors unite, collaborating to build effective and foundational frameworks and policies to drive actionable change.
Business and governmental leaders make significant investment, sparking structural changes to the global economy that prioritize low-emissions industries and accelerate the transition to net-zero.
The world’s geographies approach their respective “turning points”—when the benefits of a net-zero transition begin to outweigh the costs—and ultimately drive regional net-positive growth and value.
Following the turning point, society realizes a greener future—where interconnected, low-carbon systems underpin a clean economy that grows at an increasingly faster rate than its carbon-intensive alternative.
The analysis shows that no two paths to net-zero are the same. That’s because of the way governing bodies and societies are structured, differing exposure to climate change and overall risk profile and a variety of marketplace strengths and capabilities.
Similarly, each region will have its own unique turning point. For example, Asia Pacific is expected to see the benefits of a low-carbon transition as early as the 2020s, while Europe will not see returns on investment until the 2050s, Deloitte said.