Climate Change: The Cost of Inaction

Yes, a cap-and-trade plan will drive up the marginal costs of using fossil fuels.

But this relatively small increase in prices -- the Congressional Budget Office estimates that pending legislation would incur a net economy-wide cost of about $175 per household per year by 2020, and the Environmental Protection Agency estimates are even lower -- is necessary to avoid much, much larger costs in the future. If we can dramatically reduce our use of fossil fuels (which release heat-trapping carbon gases into the atmosphere) now, we have a chance at avoiding catastrophic changes in our climate.

It’s not about saving the ice caps and glaciers in and of themselves. It’s about preserving a stable environment on which 6.5 billion people rely for food, water, shelter, and transportation. Just how many trillions of dollars would it cost us over the coming decades to move communities and infrastructure away from coastal areas, and to adapt to severe droughts, wildfires, storms, and floods? Renowned British economist Sir Nicholas Stern projected in 2006 that it would be “equivalent to losing at least 5% of global GDP each year, now and forever.”

And just because our marginal energy costs go up in the short term doesn’t mean our total monthly bills must rise, too. There are myriad opportunities to use our energy more efficiently and actually save money. Existing buildings can be retrofitted with better insulation, double- and triple-pane windows, more efficient appliances and heating/cooling systems, and LED-lighting. New buildings can be designed to optimize the use of natural light. Communities can be designed to be pedestrian-friendly, with easy and safe access to sidewalks, bike paths, and public transportation, and to take advantage of the efficiencies of district energy systems to meet heating and cooling needs. Furthermore, as clean, renewable energy continues to come down in price, our marginal energy costs will decrease in the long run.

Yes, there will be winners and losers as we move from fossil fuels to clean energy. It happens with any transition, and that’s why Congress has provided funding to help train Americans for new opportunities in a clean energy economy. But make no mistake, if we don’t make this transition, climate change will continue on an irreversible course that will inflict far more economic pain. So the question is -- can we continue to say, “We can’t afford to pay even a little now,” without asking, “But what will it cost us if we don’t act?”