The Economic Argument for Climate Action

September 14, 2016 Jenna Bieller

Author: Jenna Bieller assists Renewable Choice in providing market-based insights, analysis, and sustainability communications.

The largest companies in the world, including Walmart, Apple, and Google, are bringing sustainable business strategies to the forefront of corporate agendas. These strategies unfold in a variety of ways, including rooftop solar installations, energy efficiency upgrades, and green power procurement. Financial institutions, such as Citibank and Bank of America, are shifting investments from away fossil-based portfolios and putting big bucks into low-carbon business. The United States government is urging climate action by pushing states to adopt low-carbon standards to replace old carbon-emitting power plants with cleaner sources of electricity.

Why the sudden urgency?

As it turns out, inaction in the face of climate change demands significantly more cash than the cost of moving away from dirty, polluting sources of energy. In the past year alone, multiple reputable sources have released data estimating the likely economic outcome of maintaining a business-as-usual approach to a warming. These studies all come to an overwhelming consensus that the cost of climate change adaptation far outweighs the financial commitment it will take to avoid the worst case climate scenario – a reality that comes with broad implications for society, as well as liabilities that businesses need to consider.

Social Implications

Findings from the University of California Berkeley suggest that rising temperatures, due to unmitigated climate change, have the sole potential to directly drive down global GDP by up to 20%. Beyond reducing global economic productivity, another report released in June of 2015 presented a range of tangible economic costs America could face as a result of climate change. In this report, U.S. EPA scientists monetized the risk of inaction to estimate the dollar value of likely damages that the United States could incur if climate change is not addressed.

According to this study, resources and money used to reduce climate change-causing greenhouse gas (GHG) emissions will have vast beneficial impacts on humans and the environment by the year 2100, including:   

  • Avoiding 57,000 deaths related to poor air quality
  • Sparing between $10-34 billion in increased power system costs
  • $2.8 billion in avoided damages due to inland flooding
  • Between 6 and 8 million fewer acres burned by wildfires

In addition, a Harvard study refuting accusations that GHG reduction is too costly found that the proposed U.S Clean Power Plan would return net benefits of $38 billion annually, placing nearly all regions of the nation at an advantage compared to business-as-usual scenarios. These examples represent just a small subset of the costly risks that society can avoid with broad GHG-reducing measures.

Business Implications

To fully understand the economic case for climate action, it is important to also address financial risks for the private sector. Some corporations have expressed worry that addressing climate risk could negatively affect their bottom line, yet studies show that 93% of U.S. companies face financial risk that is directly related to the changing climate. To put this into dollar terms, by ignoring climate change, American companies put over $33 trillion at risk!

Organizations that factor climate risk into their business strategy not only protect themselves from adverse side effects but also open the door to the advantages that fossil-free technologies offer. The price to install renewable technologies like wind and solar is plummeting, and – once established – wind and the sun produce essentially free energy. Companies who commit to climate action using green power have the opportunity to realize financial gains in a volatile energy price environment by locking in low prices for renewable energy, via power purchase agreement for example.  

Some of these predictions around the value of climate action are already taking shape. In March of 2016, the International Energy Agency (IEA) announced that global economic growth has remained strong despite stagnant greenhouse gas emissions – primarily due to the advancement of renewable technologies. Since IEA began tracking emissions in 1975, this is the only time that a stall in emissions was associated with economic expansion.

This preliminary trend suggests that sustainably-fueled prosperity is not only possible, but it is already happening globally. With the world moving into an era of clean growth, renewable energy is no longer the alternative: it is the solution.


Our door is always open! Reach out to our team of experts to evaluate your climate strategy and learn what risks climate change may pose to your business. 

The post The Economic Argument for Climate Action appeared first on Renewable Choice Energy.

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