Climate inaction could cost world USD178 trillion: Deloitte

24 May 2022

Climate change - if left unchecked - could cost the global economy USD178 trillion over the next 50 years, according to a new report from Deloitte. But if the world acts now to rapidly achieve net-zero emissions by mid-century, the transformation of the economy would set the world up for stronger economic growth by 2070.

(Image: World Economic Forum)

The Global Turning Point Report from the recently established Deloitte Center for Sustainable Progress (DCSP) was released during the World Economic Forum's annual meeting, which is taking place in Davos, Switzerland from 22-26 May. Based on research conducted by the Deloitte Economics Institute, the report analyses 15 geographies in Asia Pacific, Europe, and the Americas.

If global warming reaches around 3°C toward the century's end, the toll on human lives could be significant - disproportionately impacting the most vulnerable and leading 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, Deloitte said. But if the world acts now to achieve net-zero emissions by mid-century, the transformation could increase the global economy by USD43 trillion - a boost to global GDP of 3.8% - in 2070 "compared to a climate damaged baseline".

"The time for debate is over. We need swift, bold and widespread action now - across all sectors," Deloitte Global CEO Punit Renjen said. "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 … what we have before us is a once-in-a-generation opportunity to re-orient the global economy and create more sustainable, resilient, and equitable long-term growth. In my mind the question is not why we should make this investment, it's how can we not?"

With global coordination and rapid action, the world can still achieve net-zero emissions by 2050, the report says. This will require extensive coordination and global collaboration, with governments needing to collaborate closely with the financial services and technology sectors. During the initial stages, the cost of upfront investments in decarbonisation coupled with the already locked-in damages from climate change would temporarily lower economic activity compared with the current emissions-intensive path, but as the transition progresses a turning point would be reached where the economic benefits of avoided climate damage and the emergence of new sources of growth and job creation start to outweigh the costs.

"It's important that the global economy evolves to meet the challenges of climate change," Pradeep Philip of the Deloitte Economics Institute said. "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 sees global decarbonisation progressing through four stages:

  1. Public and private sectors unite, collaborating to build effective and foundational frameworks and policies to drive actionable change.
  2. Business and governmental leaders make significant investment, sparking structural changes to the global economy that prioritise low-emissions industries and accelerate the transition to net-zero.
  3. 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.
  4. Society realises a greener future - where interconnected, low-carbon systems underpin a clean economy that grows at an increasingly faster rate than its carbon-intensive alternative.

Every region needs to achieve net-zero by 2050 but will take its own unique path based on a range of factors, including governmental and societal structures, exposure to climate change and overall risk profile, and marketplace strengths and capabilities. Similarly, each region will have its own unique turning point, the report notes. 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. However, if rapid action is taken, all regions could achieve their turning point by 2070 and continue to reap the benefits long after.

The report does not set out technology routes to decarbonisation, but sees the energy mix switch from reliance on fossil fuels to "renewable electricity augmented by fuel sources such as hydrogen".

"In order to find new and lasting solutions to these societal challenges, we must model new forms of cooperation and pursue a multi-party, holistic approach," said Bernhard Lorentz, founding chair of the DCSP and Deloitte Global Consulting Sustainability & Climate Strategy leader. "The Turning Point analysis lays a powerful foundation of economic benefit and growth for decision-makers, influencers and participants to work from for individual and shared prosperity."

Researched and written by World Nuclear News