The Boston Consulting Group's new Center for Climate Action, in a recently published report, finds that the cost of inaction on climate change far exceeds the investment needed to combat it. Ignoring the problem has a very high price tag, estimated at a reduction in global GDP per capita of 30%, if not more, by the year 2100, far greater than the cost of addressing it, given the rapid technological advances in low-carbon technologies.
According to the Boston Consulting Group's recent publication Flipping The Script on Climate Action, the economic costs of climate change far outweigh the economic impact of investing heavily to decarbonise the planet.
New advances and developments in low-carbon technologies have shown that emission reductions increasingly have a positive economic impact. For many countries, these emissions reductions translate into an increase in GDP. The report outlining these findings has been released by the new Centre for Climate Action (CCA) BCG, a specialised centre of expertise, aims to help businesses, governments and social sector organisations lead the technological and economic transformation needed to address the growing threat of climate change.
"This is a global challenge for the coming decades, one of the most critical issues for many of our clients, and a clear leadership imperative for BCG," notes co-author Michel Frédeau, BCG's Global Climate and Environment Leader and co-author of the publication. "The good news is that large emissions reductions are not only possible, they also make economic sense.
A basis for economic action
The publication analyses the trade-offs faced by different actors in addressing climate change. Existing research shows that unchecked warming will reduce global GDP in 2100 by up to 30%, with significant additional risks given the far-reaching effects of global temperature rise and new evidence pointing to continued more dramatic negative impacts than expected.
In direct comparison, these figures are much higher than the economic costs of taking action. According to the BCG report, most countries can already meet around 80% of the Paris Agreement requirements without resorting to immature or not yet developed technologies. The relative economic impact of drastically reducing CO2 emissions is therefore likely to be slightly negative or even positive for many countries (representing around +/- 1% of national GDP in 2050).
Based on this positive economic impact, the authors of the report urge governments, companies and investors to intensify their efforts to reduce CO2 emissions. In the absence of an international regulatory framework and a global price on emissions, governments should take unilateral action by adopting national CO2 pricing schemes, subsidies for green technologies and sector-wide regulatory models in place. For their part, companies must define their own roadmap towards full emission reductions and accelerate initiatives that already have a positive or neutral economic impact, while developing the new technologies that will play an increasingly important role in the coming decades. Those sectors struggling to reduce emissions must take action and partner with competitors, customers and suppliers in initiatives to share the risks of major investments in research and deployment of new technologies.
A comprehensive climate offensive
Given the urgency to act on climate change, BCG has integrated its intellectual capital, innovation leadership, and expertise in this area into a Climate Action Centre (CCA). The CCA will support the global drive for decarbonisation and provide organisations with tools to achieve reductions in carbon dioxide emissions by focusing on three areas: business strategy, operations, and stakeholder engagement. It will also work with governments, NGOs and social sector groups to define and implement strategies to reduce emissions.
As companies refocus their strategy to drive their own transformation towards low-carbon operating models, CCA will work with them to assess business and portfolio impacts under a range of future climate scenarios. On the operations side, CCA will help companies identify and pursue the most cost-effective path to emissions reductions, both in their own operations and in their supply chains. The CCA will also assist organisations in their efforts to engage with the climate change action agenda of their own operations. stakeholders internal and external.
"BCG's Centre for Climate Action has been created at a critical time, when both businesses and governments need to accelerate progress on reducing carbon emissions," says Patrick Herhold, Managing Director and Partner at BCG. "As we detail in our publication, there is real momentum building for low-emission companies as they reinvent their business models and decarbonise their operations. The CCA will engage with business and government leaders and be a catalyst for climate impact."