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One more reason to act fast on climate: economics

Taking climate action presents a rare, once-in-a-generation opportunity to reorient the global economy for more sustainable, resilient and equitable growth

Nearly every country and sector stand to gain through swift climate action and decarbonization. Image: Andreas Gücklhorn on Unsplash

Jennifer Steinmann
Deloitte Global Sustainability Leader, Deloitte
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This article is part of: World Economic Forum Annual Meeting

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  • Limiting warming to as close to 1.5°C as possible presents a rare, once-in-a-generation opportunity to reorient the global economy for more sustainable, resilient and equitable growth.
  • If we take decisive climate action now, there is potential to gain $43 trillion in net present value to the global economy by 2070.
  • How the transformation looks and unfolds will vary by region, but nearly every country and sector stand to gain through swift decarbonization.

The latest IPCC report serves as a warning that time is no longer on our side to take action on climate change.

At the heart of the Deloitte Economics Institute’s recently released Global Turning Point report is the question – “What if we seized this opportunity?”

Have you read?

The report examines two possibilities: global action and global inaction. Economic modelling reveals the growth and opportunities that could lie ahead in the next 50 years if we take swift and substantive global climate action, compared to an economic baseline of insufficient action that considers mounting damages and lost opportunity. The takeaway? If we take decisive action now, there is potential to gain $43 trillion in net present value to the global economy by 2070.

We can help reverse the trend of unprecedented temperature rise through a societal shift in behaviour and a sequencing of efforts by government, business and civil society. The world can still achieve net-zero emissions by 2050 and we have a chance to meet the Paris Agreement goal to limit warming to as close to 1.5°C as possible.

And as business leaders convene this week at the World Economic Forum’s Annual Meeting in Davos – where the theme “working together to regain trust” couldn’t be more relevant in a world of distrust and conflict – Deloitte’s report findings show that rapid climate action can significantly boost GDP in many parts of the world, accelerating growth and providing new employment opportunities.

Global climate action vs inaction

What might happen if we continue along the business-as-usual path?

A recent Deloitte survey spanning 23 countries and more than 23,000 respondents found that over half had personally experienced a climate-related extreme weather event recently, from wildfires and excessive heat to flooding and drought. Unchecked climate change could create $178 trillion in global economic losses (in present value terms) between now and 2070. And we know that oftentimes those who contribute the least to global carbon emissions suffer the most from climate impacts.

Strong climate action could deliver US $43 trillion* to the global economy by 2070.
Strong climate action could deliver US $43 trillion* to the global economy by 2070. Image: Deloitte

If we let global greenhouse gas (GHG) emissions rise and the planet continues to warm, we’ll see a future where average temperatures increase by around 3°C by 2100. Not only will this lead to significant damage on an environmental and human scale, but it will also be detrimental to the global economy.

But what could happen if we took concerted, coordinated steps towards decarbonization right now?

The Deloitte Economics Institute analysis shows that the race to net zero will not only benefit our environment, it will also lead to long-term economic growth. We already have many of the technologies, business models, and policy approaches to deliver rapid decarbonization. This economic transformation could bring significant and more sustainable economic prosperity, due to the averted costs of climate damage and the new jobs, industries, innovations and opportunities that a decarbonized global economy would create.

Regional economic benefits of decarbonization

Rapidly addressing climate change is a global economic imperative – with benefits to all. How the transformation looks and unfolds will vary by region, but nearly every country and sector stand to gain through swift decarbonization and climate action.

  • Asia Pacific can transform its $96 trillion loss from the baseline scenario into a $47 trillion gain by limiting warming to 1.5°C. By 2070, the region’s economy could grow by $9 trillion a year relative to a world with 3°C warming. This is approximately equivalent to adding Japan’s, Australia’s and India’s economies to the region in 2070 alone.
  • Europe, meanwhile, can capitalize on a relatively low-cost transition to reap the benefits of becoming the world’s first carbon-neutral region. Rapid decarbonization can increase regional GDP by 1.8% in 2070 (or €730 billion) compared to the 3°C baseline, a benefit that could mount in following years as the result of Europe’s 30-year low-emission industrial revolution. Although the advantages would not be immediately as significant as they would be in Asia Pacific, at an annual cost of 0.7% of European GDP until 2050, the benefits of proactive continental decarbonization would outweigh the costs.
  • Relative to the 3°C warming pathway, decarbonization across North and South America can boost regional GDP by 1.8%, or $1 trillion, in 2070 alone. The US can reap $885 billion of this benefit, a dividend that would exceed the current combined annual revenues of Amazon, Alphabet and Microsoft. Given this upside, it is in the economic interest of the US to mobilize its influence to encourage global decarbonization.
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What's the World Economic Forum doing about the transition to clean energy?

The size of the opportunity is clear. In fact, those most exposed to the economic damages of unchecked climate change, like Asia Pacific, also have the most to gain from embracing a low-emissions future. However, the benefits of decarbonization to each region can only be fully realized by coordinated, global climate action.

Reorienting the global economy in the race to net zero

Limiting warming to as close to 1.5°C as possible presents a rare, once-in-a-generation opportunity to reorient the global economy for more sustainable, resilient, and equitable growth. This will be an industrial revolution of unprecedented speed and scale, and will require setting aside existing frameworks in favour of a systems-lens approach: extraordinary levels of collaboration and a synchronized transformation of multiple, interdependent systems. Taking substantive, collective steps to decarbonize the global economy can significantly boost economies in many parts of the world, accelerate growth, and provide new employment opportunities.

We can endlessly model, analyze, and recommend courses of climate action, but we each have a role to play in taking action and accelerating change at all levels to fight the climate crisis – and to effect real and lasting change for our collective future.

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May 21, 2024

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