New reports find economic benefits in tackling climate change

Wed 15 October 2014 View all news

Two more new reports have found that tackling climate change can bring global economic benefits and that there are particular opportunities for the UK in the low carbon transition. One of the reports - by Cambridge Econometrics for WWF - found that reducing the UK's carbon emissions by around 60% by 2030 (as the CCC recommends) would increase UK GDP by over 1% in net terms and create over 190,000 additional jobs.

The Climate Policy Initiatives report - Moving to a Low Carbon Economy - found that the right policies can maximize the financial benefits of a low-carbon transition. It concluded that:

Transitioning to a low carbon electricity system would bring the global economy an estimated $1.8 trillion in financial savings between 2015 and 2035. This is because significantly reduced operational costs associated with extracting and transporting coal and gas outweighs increased financing costs for renewable energy and losses in the value of existing fossil fuel assets.

Transitioning from oil to low carbon transport could increase global investment capacity by trillions or result in net costs, depending on policy choices. Regions that import more oil than they produce — including the United States, Europe, China, and India — stand to benefit most from together reducing their oil consumption in favour of low-carbon alternatives regardless of whether oil-producing countries choose to act. However, if oil importing countries act then oil producers can significantly reduce the impact on their economies by shifting to low carbon alternatives.

Meanwhile, a report for WWF - The Economics of Climate Change Policy in the UK - from Cambridge Econometrics in collaboration with Professor Paul Ekins of UCL finds that tackling climate change – with a clear policy that meets the first carbon budgets recommended by the Committee on Climate Change (CCC) – makes clear economic sense for the UK. 

It says that reducing the UK’s carbon emissions by around 60% by 2030 (as recommended by the CCC) would:

  • Increase UK GDP by 1.1% in net terms
  • Result in at least 190,000 additional jobs being created across the UK economy
  • Increase average annual household incomes by £565
  • Increase the Government's revenues by £5.7bn per year
  • Reduce imports of oil and gas by £8.5bn per year, thereby improving the UK’s energy security
  • Improve air quality - the reduction in emissions from road transport alone would mean that healthcare expenditure could be reduced by £96m to £288m annually

The report is based on Cambridge Econometrics' macro-econometric model (called MDM-E3) that uses real life data - including the past behaviour of UK households and businesses - to understand what impacts a particular policy is likely to have on the UK economy. 

The new reports are consistent with the LowCVP's report 'Investing in the Low Carbon Journey' which was published in July.

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