One of the commonest bogeys raised by those resisting the transition from fossil fuels to renewable energy (RE), is that doing so will be too expensive. They also advocate that this switch be postponed, or that so-called “greener” fossil fuels like natural gas be used as a bridging fuel to a clean energy future. At the very least, they argue, governments should wait till economies are on a growth track and inflation is curbed
All such arguments have been repeatedly proved to be completely untrue. In fact, with each passing year, it is getting easier and cheaper to make this transition. However, as two important recent studies point out, the key thing is that the transition needs to happen now, in order to stave off the worst impacts of runaway climate change. To postpone the shift to RE is ultimately going to be way more expensive for economies.
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The International Monetary Fund (IMF) stated earlier this month that steps to reduce greenhouse gas (GHG) emissions by 25% by 2030 would lead to higher inflation and lower growth. However, not to do so would be more costly. In its World Economic Outlook 2022, the IMF states that a 25% reduction by the end of the decade could slow global economic growth by 0.15-0.25% each year over the next 8 years. Inflation increase could be between 0.1-0.4%. However, a delay would be more costly. According to IMF models, if the energy transition begins only in 2027, it will be more rushed, less considered and would cost more. The IMF stated that governments should not wait until inflation was lower to act on climate.
A study by economists from Oxford University, published last month, meanwhile points out that switching to RE can save the global economy up to $12 trillion by 2050. The study, Empirically Grounded Technology Forecasts And The Energy Transition, states that a rapid green energy transition could be as much as 80% cheaper than continuing with our current fossil fuel-based economy. At the heart of this analysis is the fact that the cost of RE continues to fall dramatically, at an even faster rate than expected. “Even if you're a climate denier, you should be on board with what we're advocating. Our central conclusion is that we should go full speed ahead with the green energy transition because it's going to save us money,” one of the report’s authors, Doyne Farmer from the Institute of New Economic Thinking at the Oxford Martin School told BBC News.
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