Citigroup has just issued a report from their Alternative Energy and Cleantech Research Unit, saying that “The central case we have in the report is that the costs in terms of lost (gross domestic product) GDP from not acting on climate change can be $44 trillion dollars by the time we get to 2060.” The report can be found here.
Having looked through the report, I can only say that if Citigroup uses the same logic for all their business decisions, you should not buy their stock. I just would also like to add that they don’t mention they’ve invested $100 billion in financing their solution to this $44 trillion problem.
Nonetheless, the report says that if we don’t adopt the green solution that they want to finance, the world will spend $1.8 trillion more on fuel and capital expenditures than we would if we go green. Which is interesting, given that most sources say green energy is more capital intensive than fossil fuels. (I strongly support adoption of renewable energy, but that’s despite the higher capital costs, not because of it.)
But $1.8 trillion is nowhere near close to $44 trillion. Wherein lies the difference?
Well, they say that damages due to climate change of 2.5C will be $44 trillion. If calculated at a 0% discount rate.
The Intergovernmental Panel on Climate Change believes that temperatures will rise by between 0.3C and 0.7C by 2035. I guess the period between 2035 and 2060 will be… dramatic.
As for the zero discount rate, that is just… crazy. Nicholas Stern was heavily criticized by economists the world over for using a discount rate as low as 1.4%. Typically, the discount rate for exercises such as this is 5%.
Looking around me in 2015, I do not see evidence of $1 trillion in losses to global GDP caused by climate change. Looking around me I don’t see anyone even claiming such a thing. We are not housing millions of climate refugees. The millions of refugees we see are fleeing conflict and poverty. The head of the UNHCR gave an impassioned speech asking for help with refugees. He mentioned conflict and poverty–not one word about climate change.
I do not see evidence of $1 trillion in losses to GDP this year from storms, floods or drought. I just sat through the strongest typhoon of the year in Taipei. Damage was slight, as was loss of life. It was not considered anything more than slightly unusual. Hurricane frequency and intensity are down. Floods and drought are occurring at normal historical levels.
Well, maybe next year we’ll have $2 trillion in damages?
Citigroup lost 90% of their share value due to poor decisions. They’ve gone through more CEOs than a bad baseball team goes through pitchers. They have lost billions for their investors, been subject to billions in fines for regulatory infractions. They have laundered hundreds of millions of dollars for drug traffickers.
Sounds like the right people to be telling us how horrible climate change is going to be and how using their special green finance vehicles is just the right thing to save us.