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The cost of inaction: new CEA report

Laurie Johnson

Posted July 29, 2014

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The Council of Economic Advisors (CEA) just released an important analysis on the costs of delaying climate action. It follows on the heels of many other reports (e.g. click here and here) sounding the same alarm: climate change is here, it is very costly, and doing nothing to reduce dangerous carbon pollution runs intolerably high risks.

At its heart, the most fundamental point of the report is this: climate change policy should be thought of as a risk management problem. While we can’t eliminate all risks, we can do a lot to greatly reduce their magnitude and likelihood. Given the scale of these potential impacts, we simply can’t afford to delay taking action.

The report emphasizes that exceeding a 2 degree Celsius increase in global temperatures, which we are well on track to do if we don’t act soon, greatly increases the likelihood of numerous “tipping points”—irreversible thresholds beyond which damages could be so large as to destabilize entire ecological and human systems. The “most likely” increase under business as usual is somewhere around 3C, but an increase upwards of 8C can’t be ruled out (14 degrees Fahrenheit).

Along this vein, here are three critical points in the paper:

1) The more we delay taking action, the more expensive it will be to stay below a 2C ceiling and the less possible it becomes to attain at all. This is eminently common sense: if you have a serious illness, you know that the longer you delay getting treatment, the riskier it becomes and the more expensive it is to treat.

2) While having all countries take action sooner rather than later would be ideal to prevent the cost of meeting the target from spiraling out of control, if the developed countries take the lead and others follow in 2020, we can still avoid significant increases in the cost of meeting the target.

3) The benefits of reducing carbon pollution are greater than its cost.

Let’s start with the last point, because it applies to the single biggest step we can take right now to reduce our carbon pollution: impose first-ever limits on carbon pollution from power plants, which account for almost 40 percent of US carbon pollution.

The benefits of doing this definitely exceed the costs.

The Environmental Protection Agency (EPA) has proposed state-by-state limits to reign in this pollution in its Clean Power Plan. Holding population levels constant at today’s levels, EPA’s highest cost estimate for complying with the carbon pollution standard ($7.5 billion in 2020) implies a cost of $61 for the average American household in 2020, compared to $145 in climate benefits. If you add air pollution health co-benefits (e.g. thousands fewer premature deaths and heart attacks, hundreds of thousands prevented asthma attacks,reduced cognitive impairments in growing children), that number increases to $375 per household.

Let your representatives know your support for the Clean Power Plan:

 Click here to take action

As to points 1) and 2), it is well worth reading past the executive summary:

Attaining the 2C target, and the cost delay

According to the latest research, stabilizing CO2 pollution concentration levels (and the equivalency of other warming gases) in the atmosphere at 450 parts per million (ppm) gives us a 66 to 100 percent chance of keeping temperatures from rising above 2 degrees. Stabilization at 550 ppm reduces that chance to less than 50/50 (IPCC WGIII AR5 2014). (This is pretty sobering, given we could see increases upwards of 1,350 ppm by 2100 if we do nothing).

The executive summary presents a powerful number: the cost of reaching a given ppm target increases on average by 40% per decade of delay. But this is just an average over many different target levels. Delaying is much more expensive for stringent targets. A decade’s delay in reducing the amount of emissions necessary to stabilize at 450 ppm could increase costs by as much as 700 percent (p.14).

Developed countries leading first still makes a difference

The best reward from this rather technical paper was this: even if only the developed countries go first (with others joining in a decade), we could still prevent mitigation costs from increasing by as much as 300 percent.

On this note, there’s a lot to be hopeful about: the costs of mitigation, in particular cleaner renewable energy, are coming down rapidly. Wind is now competitive with natural gas and, according to a recent Department of Energy report, solar is rapidly becoming competitive with wind. Markets are moving in the right direction, favoring clean energy over fossil fuels, and creating the cleaner safer jobs of the future. Time is running out, but we’re not running out of solutions. These solutions will protect our children and future generations, and we must seize this moment, for they are depending on us to act now. What are we waiting for?  

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