Oscar Wilde was renowned for his assertion that a cynic holds knowledge of the cost of all things and the worth of none. This is notably significant today, as discussions on climate change often revolve around immediate expenses and disruption rather than appreciating the long-standing benefits of action.
Undoubtedly, there is a value in decreasing greenhouse gas emissions, as the ultimate reward is a sustainable planetary climate. However, the payoff, which benefits mainly future generations and those already struck by climate disasters, primarily in undeveloped countries, does not possess sufficient weight to persuade countries, businesses, or individuals to take action.
When merely considering the upfront cost, it becomes evident that the transition of the globe’s energy system from fossil fuels to renewable energy and electricity will be costly. Developing large infrastructure such as offshore wind facilities or new metro lines can cost billions of euros. The expense of new electric vehicles exceeds the financial capacity of many motorists, and most households find the expenditure for deep home energy makeover prohibitive.
Such initial costs notwithstanding, multiple studies indicate that the net expense of bold emission cuts is affordable and manageable, even excluding the massive perks of circumventing environmental destruction.
To illustrate, the recent suggestion by the European Commission to slash greenhouse gas emissions by 90% before 2040, backed up by a comprehensive impact evaluation, affirms that the increased expenses owing to a tougher goal would be compensated by long-term cost savings and diminished climate damage.
Corroborating this, research conducted by the London School of Economics’ Grantham Institute proposes that robust measures against climate change not only avoid substantial fiscal losses from climate damage, but the gains from emission cuts outweigh the expenses. The UK is predicted to attain a net advantage of roughly 4% of GDP.
Renewable and electric technologies along with energy-conserving methods will generally counterbalance their own expenses over their lifespan, ultimately making fossil fuels redundant. This addiction to fossil fuels comes with a staggering price tag. The International Energy Agency reports that in 2022, the oil and gas sector generated 4 trillion dollars via fossil fuel sales, in a year where fossil fuel subsidies peaked at 7 trillion dollars, equating to 7% of global GDP.
Securing finance, establishing supporting policy frameworks, and adjusting taxes and subsidies to bolster sustainable, rather than fossil-based energy, are the major financial hurdles in transitioning to a renewable energy system. The shift is held back by several cognitive biases, particularly the widespread “status quo bias,” which reflects an inclination of both individuals and societies to favour constancy while underestimating the cost of maintaining the status quo. As reinforced by Professor Pete Lunn of the ESRI, there is an innate reluctance to change, even when such change is ultimately beneficial.
This reluctance is partially fuelled by hyperbolic discounting, where people focus on immediate, smaller savings rather than potential significant future benefits. When it comes to contemplating an investment in solar panels, for instance, people tend to fret about the immediate financial expenditure, neglecting the long-term benefits, such as decreased electricity bills in the future.
The transition to sustainable energy needs upfront investments to reap benefits in the future. However, this is relatively easier for financially stable individuals, as those facing financial hardships are unlikely to take on debt for such investments, despite lower bills in the long term. Thus, access to low-cost finance plays a crucial role.
Regarding national policy, governments seem hesitant to accrue more debt to facilitate large infrastructure projects. Echoing numerous studies that highlight the positive implications of robust climate policies, a recent report for the French prime minister reveals that it is not wise to delay environmental action just to limit public debt.
A case in point is the regret felt over the dropped MetroLink project in 2011 due to austerity measures, leading to increased costs and continued traffic congestion in Dublin. Households too could have been more resilient to the recent energy crisis with prior investments in energy efficiency and renewables.
The lessons from these predicaments should resonate with state authorities and households: procrastination in investments in sustainable energy will only perpetuate the current fossil fuel regime, further driving climate change and amplifying economic vulnerabilities. Consequently, the emphasis must shift from the cost to the value of change for a sustainable future, according to Professor Hannah Daly, a sustainable energy professor at University College Cork.