How much will ‘doing things to stop climate change’ cost us?
Simon Evans writing in the Guardian last September noted how a thinktank got the cost of net zero for the UK wildly wrong – and that Civitas’s deeply flawed report was timed to follow the PM’s speech in which he called for an ‘honest approach’ to the issue. The DeSmog website noted, however, that this ’embarrassingly wrong’ Tufton Street net zero report got widespread coverage.
Even the opposition have got spooked about the ‘cost of green policies’, as Labour cuts its £28bn green investment pledge by half. The government has indeed claimed there are ‘costs’ – and yet Rishi Sunak’s net zero U-turn puts UK business investment at risk.
And that’s the point: business does not like uncertainty or risk.
So, rather than talking up the costs of ‘green policies’, we need to be asking: What will climate change cost the UK? Risks, impacts and mitigation for the net-zero transition – as a paper from the LSE from a couple of years ago was already highlighting. At the end of last year, financial services company S&P was quantifying the financial costs of climate change physical risks for companies. When it comes to pension funds, we really are looking at the longer-term, and so, under “The Climate Risk Delusion” the Carbon Tracker website showed that under-pricing climate risk contributes to climate change itself, and puts global pension wealth in peril. But ultimately, as the Finance Watch website notes, economic models underestimate climate risks.
We need to be quantifying these costs and making these absolutely clear when deciding what actions need to be taken. The Climate Action website has put together the essentials of climate scenario analysis for financial institutions: “
Climate change is already a reality. What has yet to be determined is how, and to what extent, the physical, transition and market risks associated with climate change will affect economies, financial institutions, and investment portfolios over the short- and long-term horizons.”
This is their infographic looking at the possible tools:
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