Why $16.5 Trillion to Save the Planet Isn't as Much as You Think

195 Countries Sign Historic Climate Deal in Paris
  • Energy industry may get $68 trillion by 2040, IEA says
  • IEA's figures reflect voluntary promises on emissions

Making the energy industry safer for the climate may not cost as much as you think, even if the price tag is $16.5 trillion.

QuickTake Climate Change

That’s the sum the International Energy Agency estimates it will cost the 187 governments to clean up pollution under the pledges made for the United Nations climate talks in Paris, which concluded on Saturday. In all, governments will spend $13.5 trillion meeting their goals. If they spent $3 trillion more, it would hold temperature increases to the ceiling they adopted of 2 degrees Celsius (3.6 degrees Fahrenheit).

It’s an eye-popping figure. Yet the world is already set to invest about $68 trillion on its energy needs by 2040, even without a climate plan, the IEA projects. That will go for everything from renewable energy to coal-fired plants and building efficiency upgrades. The Paris deal is intended to fundamentally tilt the spending toward the greener side of the business.

French Foreign Minister Laurent Fabius is applauded Francois Hollande
French Foreign Minister Laurent Fabius is applauded Francois Hollande
Photographer: Miguel Medina/AFP/Getty Images

“The strength of the agreement is that it allows a thousand policy flowers to bloom,” Paul Bledsoe, a climate aide during U.S. President Bill Clinton’s administration, said in an interview in Paris. “This sends a powerful economic signal that fossil fuels will be saddled with financial and legal premiums to remain part of the energy mix, and clean energy will enjoy subsidies.”

The deal endorsed the 2-degree goal and called on nations to “pursue efforts to limit the temperature increase to 1.5 degrees.” That more ambitious target implies vast cuts to emissions from burning fossil fuels that will go beyond the IEA’s estimate.

“Politically as well as technologically, this is no walk in the park,” said Ottmar Edenhofer, chief economist at the Potsdam Institute for Climate Impact Research Institute near Berlin, and a lead author of the UN’s most rigorous assessment of climate economics. The target may trigger “a fundamental shift of investments towards renewables, energy efficiency, and carbon capture and storage,” he said.

Energy Investment

In its latest assessment of the world’s energy outlook, the IEA forecast that fulfilling national climate plans in the Paris deal would nudge total investment up only slightly, to around $69 trillion by 2040. That would hold down temperature increases but not all the way to 2 degrees. Achieving that objective would require investment of more than $70 trillion, according to the Paris-based agency. Spending on fossil-fuel based power generation would come down while money for energy efficiency would have to soar.

“The main impact of government policies is not to change the scale of global energy investment, but rather the balance across fuels and sectors, and across supply and demand," the IEA said.

Climate Action Tracker, a group of four European institutions, estimates the measures currently announced by governments will cap temperatures at 2.7 degrees more than when the industrial revolution started in the 1800s. While those changes would be small for a single day in a single location, a permanent increase in average global temperatures at that magnitude would be greater than the one that ended the last ice age.

’Climate Extremes’

That would mean “high risks by climate extremes, commitment to multimeter sea-level rise and detrimental impacts for global agriculture and food security,” said Bill Hare, chief executive officer of Climate Analytics, a Berlin-based research group.

Keeping that in mind, envoys in Paris established a review process that would ensure countries look at their targets every five years, with a view to stepping up ambition based on advances in technologies and declining costs of clean energy.

The IEA’s figure sets out a scenario for reaching the 2-degree goal, estimating what will be required for each nation to meet voluntary pledges made under the Paris deal.

“The 2 degree target as it stands now is very challenging to meet,” Fatih Birol, director general of the IEA, said in Paris on Dec. 9. “We need to accelerate our efforts even further to reach 1.5 degrees.”

Targets Reviewed

Under the deal, every five years, starting in 2018, there would be a global assessment of whether combined efforts are sufficient. And from 2020, countries must update old pledges or prepare new ones, also every five years. That is designed to bring the world a bit closer to the overall goal over time.

“Markets now have the clear signal they need to unleash the full force of human ingenuity and scale up investments that will generate low emissions and resilient growth,” UN Secretary-General Ban Ki-Moon said in Paris after the talks concluded. “What was once unthinkable has now become unstoppable."

“Today we celebrate,” said European Energy and Climate Commissioner Miguel Arias Canete. “Tomorrow we have to act.”

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