Trillion-dollar decarbonization estimates demand a global reality check

For years, the intertwined issues of climate change and decarbonization seemed sacrosanct, almost immune to scrutiny. Scientists, economists, and policymakers often toed the (party) line, wary of being labeled climate skeptics. Given that backdrop, the intensifying debate over the global bill for decarbonization — whether its distant benefits justify the staggering immediate costs — is a welcome reckoning. Indeed, the complexity of the debate, reflecting economic, technological, environmental and equity concerns, is only now beginning to dawn on the world.

Indian Foreign Minister S. Jaishankar’s remark that “Europe has to grow out of the mindset that Europe’s problems are the world’s problems, but the world’s problems are not Europe’s problems,” made in 2022 in the context of the Ukraine war, resonates strongly here. Climate change may be a politically popular issue in progressive cities and regions of Europe and the US, but it should not dictate the priorities of the entire planet, especially when the projected global costs range from $3 trillion to $12 trillion annually.

The US, of course, is poised for a dramatic policy shift. Republican President-elect Donald Trump’s appointment of Chris Wright, a fossil fuel advocate, as energy secretary signals a pivot toward hydrocarbon exploration and production, potentially disrupting global climate agreements and inspiring other nations to challenge the conventional wisdom.

“Climate activists, for the most part, do not dispute the hair-raising price tag; they simply consider the expense worthwhile when weighed against the catastrophic damage unchecked climate change is likely to inflict,” The Economist says in its latest issue in an article titled, “The energy transition will be much cheaper than you think.” Whatever the truth, the jury is still out on whether the cost of decarbonizing the world economy is too high compared with the potential long-term savings and broader societal benefits.

The Paris Agreement’s twin goals — limiting warming to “well below” 2°C and striving for 1.5°C by the end of this century — were adopted with laudable intent. Yet, the risk-reward calculus underpinning these targets looks tenuous when one considers the fact that economic modelers have a poor record of predicting technological advances. Critics and even advocates of decarbonization increasingly acknowledge the colossal upfront investments required, the risks to economic stability, and the disproportionate burdens placed on developing nations.

The world’s reliance on fossil fuels is undeniable, with coal, oil, and gas responsible for over 75 percent of greenhouse gas emissions, according to the UN. Shifting from these energy sources to renewables is critical, but fraught with challenges. Wealthier nations may have the resources for a smooth transition, but the Global South lacks the means to achieve this without substantial financial assistance — assistance that many developed countries are reluctant to provide amid concerns over governance and corruption in aid-receiving nations.

Saudi Arabia has championed a pragmatic approach.

Arnab Neil Sengupta

Moreover, breakthroughs in technology that are essential for decarbonizing heavy industry and aviation remain uncertain, meaning that these sectors face significant hurdles in transitioning to clean energy. Truth be told, whether such breakthroughs will materialize soon enough is an open question. While urban transportation worldwide may gradually embrace electric or hybrid solutions, innovations such as green hydrogen for energy-intensive sectors are still in their infancy.

Renewable energy sources do promise energy security by reducing dependence on fossil fuel imports, yet this is not universally applicable. Not all nations enjoy abundant solar or wind resources, and nuclear energy — once heralded as a solution — has grown less competitive due to rising costs. (Even though proponents tout declining costs of renewables and the job-creation potential in green energy sectors as compelling incentives for decarbonization.)

Granted, in public health terms, transitioning to cleaner energy offers clear benefits. Northern India’s annual smog crisis, a health catastrophe exacerbated by vehicle emissions and the burning of crop stubble, underscores the urgency of clean energy adoption. Studies from institutions such as Oxford University project long-term economic savings from accelerated decarbonization, although skeptics say that these savings hinge on speculative technological advances and policy consistency.

What is certain is that rapid decarbonization raises risks to economic stability and job losses in traditional energy sectors, which are, in fact, capable of meeting the energy needs of the planet without requiring trillions of dollars of additional investments every year. Saudi Arabia has championed a pragmatic approach, as articulated by Foreign Minister Prince Faisal bin Farhan at a recent G20 session in Rio de Janeiro. He emphasized equitable and inclusive transitions, highlighting the Kingdom’s investments in technologies that have lowered emissions intensity in oil and gas operations. Saudi Arabia’s example shows that balancing environmental goals with economic and developmental priorities is possible.

In the final analysis, the decarbonization debate cannot be reduced to binary positions. It is less about whether the world should transition and more about how to achieve it equitably, pragmatically, and sustainably. Revisiting the costs and methods is not a rejection of climate action, but an overdue acknowledgment of its complexity. The true challenge lies in ensuring that this moment of introspection leads to a consensus that, instead of raising climate ambition, aligns ambition with affordability, leaving no country behind in the pursuit of a livable planet.

• Arnab Neil Sengupta is a senior editor at Arab News. X: @arnabnsg