The United States and China must avert a global economic crash by figuring out how to drive deep decarbonization while still achieving enough economic growth to maintain global GDP, according to a new study by Predict Ability Ltd., a UK-based data analytics firm.
The study, led by Predict Ability research director Richard H. Clarke, modelled 250 economic scenarios for each of more than 120 countries, based on projected GDP growth, a range of projected emissions trajectories, carbon prices, the sensitivity of loss and damage to CO2 emissions, and geographic latitude. “What the study highlights clearly,” writes Predict Ability Chair Bruce Menzies, “are the counter-balancing dangers of low growth, which triggers GDP collapse, versus high growth, which fuels climate change.”
Predict Ability appears not to have considered the possibility of stabilizing national economies without continued, relatively high GDP growth, nor factored in the estimated $26 trillion in economic benefits and 65 million low-carbon jobs that could flow from the post-carbon transition through 2030.
The study acknowledges the climate risk facing high-growth economies, while projecting serious economic risk for countries with more static GDP. At an annual growth rate of 9% over the last decade, “if China continues on its current growth path, none of the scenarios crashes, but emissions will grow inexorably,” Menzies states. But the U.S., with 1.3% annual growth, might have trouble absorbing the economic costs of decarbonization.
“From 2017 on,” he cautions, “only 36% of scenarios for the United States show long-term growth. By 2100, 64% will either have crashed…or be in the process of crashing.”
The outlook for the United Kingdom is even more dire. In a supplementary blog post on the study, republished by Energy Central, Menzies reports an 88% chance that climate change will drive the country’s economy into collapse by 2100. To survive the projected economic costs of deep decarbonization, the UK would need a 4% annual growth rate, far greater than its current 2.3%.
While “the survival of other major economies critically depends on China and the U.S. achieving and maintaining strong, yet carefully balanced growth,” Menzies says, business-as-usual policy on either emissions or economic growth is “truly a bad option.”
As one of Predict Ability’s senior reinsurance industry advisors told him, “if this modelling is even half-right, it is a wakeup call for all major economies.”