The high costs of cutting carbon emissions

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By Dr. Eric Fruits,
Econinternational

According to a report by consulting firm McKinsey & Co., the world can keep global warming in check if nations spend trillions of dollars on energy efficiency, clean power and forestry projects over the next 20+ years.  In addition to typical annual capital investments, the report concludes that beginning in 2011, additional investments of $475 billion a year would be required to keep global temperatures 2 degrees Celsius below pre-Industrial temperatures. By 2026, the cost would rise to $1.2 trillion a year.

The net present value today of the additional expenditures between 2011 and 2030 would be approximately $7.3 trillion. That is bigger than China’s economy today and equivalent to the economies of Japan and India combined.

Citation: Dinkel, J., Enkvist, P.-A., Nauclér, T., and Pestiaux, J. (2009). Pathways to a low-carbon economy: Version 2 of the global greenhouse gas abatement cost curve. McKinsey & Company.