field of solar panels
Solar panels, which produce renewable energy, are one big success story, with prices that have dropped 75 per cent in recent years (Photo: iStock/richsearsdotcom)

Topics: Ethical Living | Environment

Kicking fossil fuels will save trillions of dollars – and the planet

We can easily afford to wean ourselves off carbon-based fuels, and we can't afford not to


I’ve spent part of the past year touring Canada with a play I created based on Sea Sick, a book I wrote several years ago. It’s about how I travelled around the world with scientists, only to discover that our species is setting the stage for a mass extinction, just the sixth in the 3.5 billion years since life emerged on Earth. The play ends with a call for us to figure out how to evolve away from the patterns that are killing us.

Halfway through, there’s a scene where I write a bunch of figures on a chalkboard. It’s all there in black and white, the tale of how rapidly our species has changed the chemistry of the planet’s life-support systems, of how this is the fastest change in the Earth’s history. Ever.

The key is ancient carbon, stored in the fossils we dig or pump out of the earth and then burn for energy as oil, gas and coal. As we burn them, the carbon from millions of years ago drifts invisibly, inexorably into today’s atmosphere, amassing there and in the ocean. Audiences feel the need to talk about the play afterward — some are moved to tears at the prospect of a solution. And so once I finish performing, I go back on stage to answer questions.

I frequently get the same one: Sure. Things are bad. But it would ruin our economy to switch to energy sources not based on carbon. How can we possibly afford to change?

Worried that I was being too Pollyannaish in my call for transformation, I started to do some research. And here’s the surprising bottom line: not only do we know how to switch to a global economy that would not emit carbon dioxide, not only do we already have most of the technology we need, not only can we afford it, not only will the economy be fine, but it will likely save us masses of money. So, not just possible, but free.

Nancy Olewiler, an economist and professor of public policy at Simon Fraser University in Vancouver, says, “I do not buy, in any way, shape or form, that we cannot afford to switch.” The research clearly shows that the longer society waits to move away from carbon-rich fuels, the more money it will cost, she adds. “We can’t afford to not get going.”

It almost beggars belief, doesn’t it? It’s so different from what we hear, particularly from our federal government, which evinces utter defeat when asked to imagine any economic activity in Canada not linked to fossil fuels. But several important new studies have come up with these same calculations about the extreme affordability of what analysts call “decarbonizing the economy.”

Nobel-winning economist Paul Krugman wrote about the topic last year in a New York Times column titled “Salvation Gets Cheap.” In it, he cites a study that is part of the fifth assessment report of the United Nations’ Intergovernmental Panel on Climate Change. It calculates that stripping carbon out of the global energy system would cost the economy a median of 0.06 percent a year until 2100 — about the same as “a rounding error,” as the waggish Krugman puts it; in other words, essentially nothing. The caveats are that it would have to happen immediately, world leaders and markets would have to set a single price on carbon to keep costs uniform and make the commodity easy to trade (as is the case for, say, gold or crude oil), and all the new energy technologies would have to be used.

The knock against the calculation is that it fails to include the potentially immense financial benefits of pulling back from carbonic destruction. A world with fewer catastrophic floods, droughts and climate refugees is bound to be a less expensive world. In 2013, for example, “natural” disasters, many related to climate change, cost the global insurance industry $45 billion* and led to 26,000 deaths, according to the Zurich-based insurance firm Swiss Re.

Danny Harvey, a geography professor at the University of Toronto who has written extensively about the effects of carbon on the planet, told me that global health costs would fall by about $1 trillion a year as people are spared the ill health that comes from carbon pollution.

And then there is the International Energy Agency’s study, released last year, which makes the same case. Composed of 29 wealthy member countries, including Canada, the agency aims to ensure that access to energy is secure and stable, that markets are free and that information about how to tackle climate change is widely spread. Its 2014 report on energy technology includes the dismal fact that it will cost $44 trillion in new investments by 2050 to shift the global energy system far enough away from carbon-based fuels to keep the increase in average air temperature to about two degrees Celsius. Anything above that temperature is considered dangerous and volatile, exposing life on the planet to great risk.

That $44 trillion sounds like a huge amount, right? But the study goes on to state that the world would save $115 trillion by not having to spend money on fossils, which are expensive. That’s $71 trillion in savings. It’s those second and third numbers that so rarely get expressed.

Here’s another way of looking at it, courtesy of the Global Commission on the Economy and Climate, made up of leaders in business, government, finance and economics, and chaired by Felipe Calderón, former president of Mexico. In September, it too published a study conducted by leading research institutes from Brazil, China, Ethiopia, India, South Korea, the United Kingdom and the United States. The study found that over the next 15 years, the world will spend $90 trillion on infrastructure for cities, agriculture and energy systems. That’s just business as usual, already on the planning sheets. Infrastructure is expensive, and we’ll need a lot of it in the coming decades, no matter where our energy comes from.

But if leaders opt to divert some of that spending to low-carbon investments, the global economy will grow, the study revealed. This is the opposite of what my post-play inquisitor was asserting. Not only will shifting away from carbon not ruin the economy — it will actually bolster it. The same study found that if leaders fail to make the move away from fossil fuels, prosperity itself will be at risk.

Some examples from the commission’s study: Building cities compactly and relying on mass public transportation will save more than $3 trillion over 15 years and lead to a higher quality of life and standard of living. Phasing out the $600 billion the world now spends on direct subsidies to the fossil fuel industry (compared to the $100 billion to subsidize the emerging renewables sector) could free up that money for other uses.

I can hear my post-show interlocutor here: Okay, so it might be possible in theory, in the long term, to afford the switch to a no-carbon global energy system, but people are scared they will lose out right here today. What will this future look like, and how will we get there?

I understand the fear. These global numbers are scary and massive and hard to understand. The belief exists that if we tackle the carbon crisis, we will all end up living in caves wearing hair shirts. Here in Canada, it doesn’t feel as though there’s a clear recipe for handling the shift. Many interpret this absence as a strategy to keep Canadians off balance and worried.

All of my informants, and the studies they pointed me to, say the solution is intelligent planning that will lead to smooth switching rather than anything hasty or abrupt. “Nobody is talking about shutting down the fossil fuel industry,” Olewiler says. “It’s called transition.”

For Alex Wood, an international economist who is senior director of policy and markets at Sustainable Prosperity, a think-tank at the University of Ottawa, the helpful image is “bending the curve” of the trend line. No stomach-lurching drops in standard of living, no cataclysmic industry failures. The goal is to avoid shocks to the economy, not cause them.

Wood says that in Canada, the environmental community should shoulder some of the blame for failing to paint a clear picture of the no-carbon future. Instead, they have helped spread the false and unsettling message that the future will be almost unimaginably different from today. Because the carbon-rich energy we currently use is familiar, abundant and affordable, it’s hard to imagine a new system that would feel as safe. Except, as Wood points out, elements of that new system are already in place, both in Canada and in other parts of the world.

For example, a global movement is afoot advocating that world leaders put a price on carbon emissions. Supporters argue that carbon pricing would go a long way in helping markets shift away from fossil fuels (and that not pricing carbon emissions amounts to the biggest subsidy governments can offer industry: free waste management). Making carbon worth something helps control how much is used, by penalizing those who use a lot and offering a financial benefit for using less.

It’s the same principle as putting a price on the number of garbage bags you place at the curb destined for landfill; if garbage removal is free, you have no incentive to cut down on your waste or recycle. Here in Toronto where I live, each household is allowed to set out one bag of garbage every other week for a fee of just under $7 a year. But if you want to put out more, you have to pay a lot more, either as an annual flat fee or in the form of a paid tag for each extra bag. Recycling, however, is free. The system is set up to discourage garbage going into landfills and to encourage people to recycle.

Carbon pricing can take different forms. In a carbon tax system, a government puts a tax on every tonne of carbon fuel that wholesalers sell. Wholesalers pass the tax on to retailers, who pass it to consumers. The tax aims to encourage energy consumers to go on a carbon diet, just as my Toronto garbage fees are trying to help me cut down on the amount of garbage I produce. British Columbia enacted a carbon tax in 2008 that has slowly increased over time. Under B.C. rules, the tax cannot increase government revenues, so taxpayers get other breaks to offset what they pay for carbon. The good news is that fossil fuel usage in British Columbia has dropped 16 percent since 2008 while it rose three percent in the rest of Canada. The province’s budget is running a surplus, its economy is strong and it has the lowest overall tax rate in Canada.

In a cap-and-trade system, government leaders cap the total allowable level of greenhouse gas emissions for a given region, sell or give away permits for those levels, and then slowly reduce the total. In some systems, industries with low emissions can sell what they don’t need to larger emitters. Again, it’s a little like my garbage: if I have a tag I don’t need, I could sell it to a neighbour who has an extra load of garbage one week. The overall aim is to get carbon emissions down and to encourage industries to invest in non-carbon forms of energy. California, the world’s eighth-largest economy and by far the biggest in the United States, implemented a cap-and-trade system in 2013. Its economy is still a powerhouse, growing near the top of the pack nationally along with real annual incomes. There, the sellers of the carbon permits are the government and utilities, and the billions they’ve earned from the sales have to be put back into efforts to reduce emissions, such as renewable energy and public transit, or rebated to consumers. It’s a win-win.

“The evidence is that in areas that have done this, it’s not doom and gloom and people are not impoverished,” Olewiler says.

Ontario is keen to implement a carbon pricing mechanism as early as this year. Quebec has signed an agreement to join the California trading system, and over the past couple of years other jurisdictions have leaped on board, to the point that now, as the International Energy Agency puts it, emissions trading systems exist in all corners of the globe. The biggest is the scheme begun in 2005 to cover the European Union, but now New Zealand, South Korea and Tokyo have them. China, India, Chile, Brazil, Thailand and Mexico are establishing them. In a perhaps quixotic act, Australia recently bucked the global trend by repealing its carbon tax.

Last year, 350 institutional investors representing $24 trillion in global funds called on the world’s leaders to establish stable, predictable, consequential carbon pricing and develop plans for phasing out those hundreds of billions in tax breaks now consumed by the rich fossil fuel industry.

And what’s replacing all those carbon-based fuels? Renewables. In a way unimaginable even a few years ago. In the United States alone, renewables now provide about 13 percent of the nation’s electricity. The success story is solar panels, whose price in the States has plummeted by more than 75 percent since 2008, Krugman notes, quoting a U.S. government study. Solar energy is now cheaper than retail electricity in many states. Wind capacity has also taken off, more than tripling in the United States since 2008. And renewables, particularly solar power, are soaring in Asia, too, especially in China and Taiwan, which are now considered world leaders in low-carbon energy technologies, according to the International Energy Agency.

Once again, I can hear the voice of my theatre patron, slightly anguished, even guilt-ridden: But we’re told all the time that getting carbon numbers down depends on the choices we make as consumers.

I know. I hear the same arguments. It’s as if the mighty task of reshaping this massive multi-trillion-dollar global economy falls to us as individuals. Again, that’s simply not the case. The role consumers play in all of this is not the deciding factor at the moment. The success or failure of decarbonizing the global economy depends on government policies, say Olewiler, Wood and every single one of the studies. This is a quintessential policy play. In a market system like ours, policy helps shape the economy and determine what choices consumers have. It’s difficult, likely impossible, for consumer pressure alone to effect a shift on this massive scale. Instead, governments in many parts of the world are striving heroically to make policies to promote decarbonization. The United States, China, India and the European Union are notable examples.

Alas, today, Canada is not one of them. Canada has what Wood calls a “leadership vacuum” on the shift to a no-carbon economy. The federal Conservative government is wedded to the idea that the nation’s economic might is rooted in extracting fossil fuels, that it’s our one competitive advantage.

Not so, says Wood. For decades, Canada had an advantage in its wealth of clean hydroelectric power. He’s fascinated to note that both Ontario and Quebec have begun to reassert themselves in the national energy discussion, rather than leaving it to the federal government and provinces, such as Alberta and Saskatchewan, whose wealth depends on fossils. In fact, much of the progress Canada has made in its bid to curb the growth of emissions has come from actions taken by the provinces, including the shutting down of Ontario’s coal-fired plants, another sign that policy is the key to solving this puzzle.

Of course, Canada could easily be a leader in the decarbonizing effort. Wood points to a cluster of entrepreneurs in British Columbia who have become world-class providers of low-carbon solutions to issues like managing the emissions of existing buildings. And there is evidence that Canadians long for action. A survey last year by the Environics Institute found that 63 percent of Canadians believe the scientific evidence that humans are causing climate change, and they are looking to their government far more than any other sector of society to address the issue with standards and regulations.

And it is a federal election year. The Conservative government, under Prime Minister Stephen Harper, could act on this issue and likely reap political rewards, Wood says. Rather than waving the cost of fixing climate change like a red cape in front of a bull, or an angry and fearful public, “he could put that cape down if he wanted to and change its colour.”

For my part, here’s what I tell the audience at my post-show talk: I know it all sounds overwhelming, but it’s doable and affordable. There’s immense international momentum to fix this, some of which will culminate in Paris at the climate talks at the end of the year. It’s likely not yet too late. The trend lines are only the trends, not the end of the story. Some of the smartest brains on the planet are working on rewriting that ending right now. And if our political leaders — whoever they are — believe that they will win or lose elections on this issue, then they will step smartly up to the plate, if only just in the nick of time.


All monetary figures are in U.S. dollars

This story first appeared in The United Church Observer’s April 2015 issue with the title “Why kicking carbon makes dollars and sense.”


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