Low-Carbon Energy System Could Save $1.8 Trillion

Two studies by the Climate Policy Initiative released yesterday indicate that with the right policies in place, a low-carbon energy system could free up trillions of dollars over the next 20 years.

The reports were commissioned by the New Climate Economy project as part of research conducted for the Global Commission on the Economy and Climate.

The first report compares the costs of low-carbon electricity and low-carbon transportation systems with current systems. The second report focuses on the risk of losses in the financial value of existing fossil fuel assets, or asset stranding.

Key findings from the reports include:

• Governments, rather than private investors and corporations, face the majority of stranding risk, since governments own 50 percent to 70 percent of global oil, gas, and coal resources, as well as collect taxes and royalties on the portion they do not own.
• Transitioning to a low-carbon electricity system would bring the global economy an estimated $1.8 trillion in financial savings between 2015 and 2035.
• 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 US, Europe, China and India — stand to benefit most from reducing their oil consumption in favor of low-carbon alternatives.
• Coal offers the largest emissions reductions for the least loss in financial value, and transitioning away from coal can achieve 80 percent of the needed emissions reductions for just 12 percent of the asset value at risk.

Coal-powered energy is one of the most environmentally expensive industries and costs the economy more in environmental damage than it generates in revenue, according to a UN-backed report released last year.

In addition, last year the World Bank agreed to all but stop its financing of coal plants, limiting such financing to “rare circumstances,” and to countries that have “no feasible alternatives” to coal.