Could Fighting Climate Change Help the Economy?
At the Climate Summit of the Americas in Toronto on July 9, climate change activist and former presidential hopeful Al Gore made a bold claim: that the fight to minimize or even stop climate change could be a tool to reinvigorate the global economy:
“As we see the world’s leaders trying to figure out how to get the economy to get enough escape velocity to pull away finally from the Great Recession, wouldn’t it be great if we had a global project to mobilize people, to unleash extra human energy and innovation, to create lots of jobs? As we change, we can lift the global economy.”
It’s generally assumed that making “green” improvements can be costly, with a high break-even point. Or at least, that’s what common sense says. But how can you put a price on fighting climate change, the argument goes?
Well, you can, even if there’s some argument about the best way to do so. But is the switch to a sustainable lifestyle, the path to reducing carbon emissions and thus negating climate change, just a burdensome cost without any economic benefit?
The Evidence of Economic Benefits
It’s well documented that businesses can become more profitable when they adopt a sustainable, innovative mindset. It yields cost savings and new products, not to mention improving public opinion about the company. That’s one mark against common sense already.
Homes and commercial buildings directly accounted for 12% of all greenhouse gases in 2013. (For comparison, transportation accounted for 27%, and electricity generation, 31%). That’s just the carbon footprint from everyday activities — not the issues associated with construction itself. But green building can help reduce that carbon footprint and yield other benefits, too.
When you move beyond the simple upgrades, retrofitting a building can indeed be expensive, which is why the U.S. government sponsored several tax incentives to help homeowners make the changes. Back in 2009, when President Obama referred to home insulation as “sexy,” he pitched the economic incentives for green retrofits as a way to boost the economy by stimulating job growth.
Retrofitting buildings and new green construction — all in the name of conserving resources and driving down carbon emissions — is an industry on the rise in the US. In 2005, just 2% of nonresidential buildings were constructed to be green, compared with 41% in 2012. Nearly half of all 2015 nonresidential construction will be green, equating to an opportunity worth $120-145 billion.
Home building is lagging behind that, with about 60% of residential construction companies saying 15% of their building is green — a number they project to rise to 84% by 2018. There’s clearly quite a bit of economic potential there, and multiple studies have shown that adopting a green philosophy early in the design phase can actually yield substantial savings almost right away. That’s strike 2 against common sense.
Sustainability and green design has other benefits as well — better health for a building’s inhabitatnts, for example, and better productivity, both of which contribute to a better economy.
There are other ways to look at the economic benefits, as well. A 2014 study by the University of Massachusetts’ Political Economy Research Institute (PERI) found that reducing carbon by 40% from 2005 levels could yield a net increase of 2.7 jobs in the clean energy industry — which would decrease unemployment by 1.5%. That’s strike 3 right there.
Climate change is a complex issue that needs to be addressed on multiple fronts, from lifestyle to industry to government policy and regulation. Efforts to fight it can seem costly for consumers, for businesses, and the government, but there are real economic benefits — and proof that it works. As Gore pointed out in his address, the Canadian province of British Columbia and the state of California have both achieved economic growth amid their efforts to fight climate change.
Everywhere it becomes clear that despite the appearance of high upfront costs, there’s a very real potential for economic growth that comes from sustainability and efforts to reduce carbon emissions. From building green homes to developing new technologies that can minimize the effect of greenhouse gases, the key lies in innovation and new techniques. Impact investing can provide the necessary funds to drive that innovation, and these eco-friendly investments, especially green bonds, are becoming increasingly accessible to everyone who wants to make a difference.
