PHC's Senior US Partner, Jonathan Elton brings a balanced view on the cost of GHC reductions.
A newly published study by Nature has provided much needed insight into how much the cost of reducing carbon emissions in the USA will cost us all. The figures are staggering in their enormity and provide input into many political, business, and personal debates to come over future years on how much can be afforded, is desired and on what should it be spent on.
In 2019 China is estimated to have emitted 27% of the world’s greenhouse gas (GHG), followed by the USA with 11%, then India with 6.6%. The US produced 6.6 billion metric tons of carbon dioxide equivalent GHG, over fifteen tonnes per person, amongst the highest countries by emissions per person.
To achieve a 95% cut based on 2005 emission levels by 2050, the cost to the USA is estimated at $11,279 per person per year for each of the next 29 years, a total cost of $327,000 or $818,000 per household. In comparison the median US house price in July 2021 was $374,000. In 2050 spending would be an estimated US$4.4 trillion, the equivalent of the entire federal government expenditure in 2019.
A critical part of assessing priorities are the estimated benefits from expenditure. Most importantly is global temperature change. Using the United Nations standard climate model, if the USA became carbon neutral today the impact would be a 0.3-degree Fahrenheit reduction by the end of the century. The 95% may therefore generously be assessed as a 0.2-degree reduction at best.
Affordability is another pivotal element in the debate. A recent Washington Post survey concluded that a majority of Americans would not support a $24 annual climate change tax on electricity bills. With inflation increasing and many people’s as well as government finances impacted by the COVID pandemic, short and even medium-term ability to pay increased costs appears limited leading to an affordability gap in what politicians and business leaders are promising and what people can and are willing to spend.
Two questions are therefore emerging in the USA as the emissions reduction debate matures.
- What is the balance between spending and climate change impact? A 60% instead of a 95% reduction in emissions would cost only 17% of the amount required to achieve 95%. The impact on climate can be estimated at a 0.13-degree rather than a 0.2-degree reduction by the end of the century. Is the lost 0.07-degrees important enough to spend the additional money on?
- How can realistic and cost-effective solutions be developed to deliver emission reductions? Currently there are many bold promises being made but little said on costs and the economic case for spending. How can governments and businesses work together to assess the most effective and highest priority areas for investment and demonstrate to the public the case and pay back of what they are being asked to fund?