An economist figured out how much Clinton's plan to save the world from runaway climate change would actually cost

Our climate is changing. There’s no scientific debate about this.

In fact, in 2016 — decades after scientists first warned of the sharp changes necessary to stop global warming — it’s more accurate to say our climate has changed.

“There’s no stopping global warming,” Gavin Schmidt, a climate scientist who is the director of NASA’s Goddard Institute of Space Studies, recently told my colleague Sarah Kramer. “Everything that’s happened so far is baked into the system.”

At this point, the real question is: What are we going to do about it?

Hillary Clinton, the person who appears most likely to become our next president, has adopted a plan to reduce US emissions — the heat-trapping gases we pump into the air when we generate power — 80% by 2050 into her campaign platform. The Obama administration made it the country’s stated aspiration at the 2016 international Paris Agreement to combat climate change.

So that raises a second question: Is this something we could actually pull off in the next 34 years?

In public policy, a good way to answer that question is to ask if we could afford it. Geoffrey Heal, a Columbia University environmental economist, recently published a paper examining what it would actually cost to meet that target.

Here’s what he found.

There are limits to our ability to predict the future

The big headline number from Heal’s paper is $42 billion to $176 billion per year every year between now and 2050.

That’s not an exact figure plucked from a crystal ball, Heal told Business Insider, but more of a “rough estimate,” or a figure that’s in the right order of magnitude but “not claiming to be correct to three significant figures or anything like that.”

Still, it’s a useful measure for thinking about Clinton’s target, said Heal. And to get there, he relied on a few assumptions:

  • Solar and wind energy will drive the vast majority of the shift to emissions-free energy.
  • Those technologies will improve and grow cheaper in predictable ways.
  • No major new technologies will upend the energy market in the next few decades.

In the best-case scenario, Heal found that the US could probably wring an 80% drop in emissions out of about $1.28 trillion dollars over the course of 34 years. In the worst case scenario, about $5.28 trillion.

Those numbers include the costs of the photovoltaic panels, molten salt towers, and wind farms necessary to generate enough clean energy to cover two-thirds of total US demand. But they also factor in the giant batteries and high-voltage interstate power lines which Heal said would also be necessary to help the country cope with a shift to power sources that only generate energy some of the time.

So is that a lot of money?

Hunt for red octoberParamountA still from the 1990 movie ‘The Hunt for Red October,’ which may or may not be a 100% accurate representation of the Cold War. The Cold War may have cost as much as $8 trillion.

When Heal set out to arrive at his figure, he wasn’t sure what he’d find. “I was genuinely curious whether this would be a financial ruinous proposition or whether it would be something we could live with,” Heal said.

All told, $1.28 trillion (or $42 billion per year) would make an 80% emissions reduction about 33% more expensive than the war in Afghanistan — though spread over more than twice as much time — but just two-thirds the cost of the war in Iraq. By another measure: about 12 Apollo programs or two 2008 TARP bank bailouts.

That places the goal squarely in the territory of things the United States could achieve, given enough political will. Still, it would definitely be limited to the just-a-few-times-a-century category, said Heal.

But let’s say things go another way, and the final cost looks more like the $5.28 trillion ($176 billion per year) Heal projects at the high end. Now we’re talking about a project 25% more expensive than defeating Nazi Germany and Imperial Japan — though, again, spread out over a much longer period — or two-and-a-half Iraq Wars.

A better way to think about this, though, is in annual terms. Right now, yearly gross domestic product in the US is about $18.4 trillion. Everything we know about finance and history tells us that number will grow significantly in the next 34 years. But right now, a $42 billion annual program would be about 0.2% of GDP. And a $176 billion annual program would cost about 1% of GDP.

That places the annual cost of an 80% emissions reduction somewhere between two NASAs and the US Air Force.

So is that a lot of money?

“I guess the conclusion that I’ve come to is that it’s expensive but not ruinous,” Heal said.

Most of the spending would come from private investors

It’s important to understand here that when Heal talks about the cost of the 80% reduction he’s not talking about tax dollars.

“This is not something the government can do,” Heal said. “This is private sector investment in infrastructure, basically.”

Historically, the role of government has been to wield carrots and sticks. Most of these lie in the tax code, and have been shown to be fairly effective in guiding investors to projects the government is excited about.

Credits for producing renewable energy or buying electric cars would fall into the carrot category, explained Heal. Sticks would look like a carbon tax or massive hike to the gasoline tax.

Whether or not the plan succeeds, we’re likely to see the creation of a major new American industry

In Heal’s calculations, the single most significant variable was energy storage.

That’s because solar and wind, the likely sources of clean energy in an low-emission America, rely on intermittent power sources. That’s a fancy way of saying that sometimes it’s night time or not very windy out.

Right now, the grid mostly solves this problem by importing traditional power to fill in the gaps left by solar and wind production. But if you’re trying to go really clean, said Heal, that’s not an option.

So a national low-emissions energy grid would need to do two things well:

  • Move electricity over vast distances, so that if one state has a low-energy day, another can lend a hand.
  • Store surplus power generated on good days to fill in the gaps on bad ones.

The first problem is fairly simple to solve, Heal said. Right now, the US grid is actually lots of little grids. But linking them up is mostly a matter of laying some high-voltage power lines. Not cheap, but a fairly straightforward upgrade to make to our existing infrastructure.

The second problem though is more complicated. We don’t yet know how much power a national clean-energy grid could put out in a day, or how reliably long-distance sharing can make up for local shortfalls. That means we have very little idea how much power we have to sock away on good days to prepare for slow ones in a clean grid, said Heal.

“It’s something we just haven’t thought about because it hasn’t been that relevant until now,” Heal said.

For purposes of his calculations, Heal assumed we’ll need the capacity to store about two days’ of renewable power. (“This figure has no rigorous scientific basis,” he wrote in the paper, “but seems to pass a ‘laugh test.'”)

Storage raises a second, technological question.

Right now our best large-scale, long-term power storage option is pretty crude: We can pump vast amounts of water up a hill on a good day, then let it run downhill on a bad day to turn a hydroelectric turbine. But Heal writes that most of the good sites for this method are already in use, and can only store a fraction of the total energy we’ll need. Home batteries from companies like Tesla and Mercedes can handle a bit more of the load. But it looks like we’re going to need massive, grid-scale batteries to get a clean power system working round the clock.

The thing is, these don’t exist yet. No one yet knows how much they will cost, which battery technologies they will use, or who will build them.

We do know that they’re likely to become a major industry though. Depending on the amount of storage we end up needing and the technologies involved, Heal estimates we’ll spend between $2.2 trillion and $5.1 trillion on these monsters over the next 34 years.

(On the plus side, we’ll save about $960 billion on fuel, which is why the final price tag of a clean grid is so much lower.)

It might be time to think about nuclear again

One interesting finding from Heal’s calculations is that the cheapest route to an 80% lower emissions electric grid might involve nuclear power.

Though nuclear power plants have a scary reputation, they only emit water vapour. And they work round-the-clock, regardless of weather. With enough new facilities, Heal found we’d only need to replace about half of US power generation with wind and solar rather than two-thirds, and the cost of storage would drop significantly.

“That was a calculation I found surprising,” Heal said, “because nuclear is something that’s regarded as very expensive and it’s effectively priced itself out of the market these days.”

Though nuclear power plants provide about 20% of US electricity, the last one to come online in the US was Tennessee’s Watts Bar facility in 1996. (Early preparations for Watts Bar 2 began this year.) At the same time, as many as 20 ageing plants could shut down in the next decade.

The Obama administration has broadly signalled its support for nuclear. But the politics of fission power are dicey at best, and it’s easy to imagine a major nuclear power push struggling to get off the ground.

Heal’s calculations may miss a key variable

Economists are good at making judgments about cost and efficiency, but struggle to account for squishy human foibles like politics and short-term thinking.

Heal’s paper assumes society will work in a concerted, directed way to address climate change. That, for example, people will continue to move toward electric cars even if gas prices remain under $3/gallon.

This isn’t always how things work.

Myron Ebell, an energy and environmental policy analyst (and avowed climate science sceptic) with the libertarian Competitive Enterprise Institute think tank, said a program on the scale Heal envisions would struggle to get off the ground.

“I think Obama has gone about as far as you can go in terms of twisting the current regulatory structure to try to do things,” Ebell said.

“At some point Congress would have to vote for this kind of program, and I think it’s a long way in the future if at all. I have my doubts that it will ever happen, but right now you can say it’s several Congresses away.”

Ebell said that political “friction” — from opponents ranging from national lawmakers to local landowners objecting to power lines and windmills — will likely add costs at every stage of a major national energy overhaul.

Heal agrees that politics and planning could be a major hurdle.

“I don’t think anyone has thought through in any detail what it would take to mobilize the amount of money that we’re talking about here,” he said.

“It’s a question of providing a structure through which [investors] feel comfortable making these commitments, because they’re huge commitments… We’d need a carefully thought out policy, establishing some clear expectation of continuity in the field over quite a long period of time.”

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