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By Fred Wellington
Science has lately painted an increasingly detailed and consistent picture of the
severe environmental impacts of climate change. Now, the British government is about to release a report on the
economics of climate change. The study, led by
Sir Nicholas Stern, is one of the most rigorous and comprehensive to date, and suggests that the economic costs of climate change will reach into the trillions of dollars if the world does not act quickly and significantly on climate change. The report concludes that addressing climate change makes economic sense as well as environmental sense.
The Stern report was highlighted at a
meeting of the top 20 emitting countries in Monterrey, Mexico this week, a follow-up on the work at the
G8 summit in Gleneagles in 2005. The top 20 emitting countries account for
75 percent of global emissions, according to
WRI estimates.
On the other side of the coin, the
World in 2050 report from
PriceWaterhouseCoopers looks at the costs of transforming to a greener global economy. It estimates that a 60% reduction in emissions by 2050 would reduce economic growth by 2-3 percent compared to a baseline scenario. That’s the equivalent of about one year’s growth spread over 4-5 decades.
Changing Economics Under Carbon Constraints
Governments are now developing policies that internalize the cost of carbon emissions. These policies create new business issues for business, entailing both risk and opportunities. The
CDP4 report from the
Carbon Disclosure Project summarizes many of these. Companies like
General Electric,
Wal-Mart, and
Dupont, as well as financial institutions like
Bank of America,
Goldman Sachs,
JP Morgan, and
Citigroup are developing policies and strategies to effectively manage climate change risk and opportunities.
WRI’s
Capital Markets Research project looks at how climate change affects the risk and opportunities of various economic sectors. Each company’s climate risk profile differs, and climate risk implications are more salient in some industries than others. For example, the
Changing Drivers report examines several auto sector companies, including Ford, General Motors, Honda, and Volkswagon, and finds considerable differences in how climate change regulation might affect their stock performance.
Furthermore, a joint
WRI/Merrill Lynch report identified 7 auto-sector companies that could actually benefit from carbon constraints:
A
WRI/Citigroup Investment Research (CIR) study also identified several North American companies that would likely be winners under carbon regulation:
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