Global warming's £10 trillion cost

PREVENTING global warming would cost the world economy a devastating $18 trillion (£9.9 trillion) even under the most conservative assumptions, a report out this week will warn.

The cost, equivalent to 45 per cent of world gross domestic product for a year, is much greater than any conceivable benefit, according to the report from top economic consultants Lombard Street Research.

Charles Dumas, author of the study, said: "This is orders of magnitude greater than the cost of dealing with higher sea levels and freak weather, net of land gains in Canada, Siberia and other cold areas in thousands of square miles."

The costing is based on the assumption that cutting global warming would require reducing the world's consumption of oil and energy, and that this in turn would reduce global growth by 0.5 percentage points a year for five years. The $18 trillion figure is the net present value of that reduction. Growth is then assumed to get back to its long-term rate, an estimate which the author says is very conservative and probably hugely underplays the true cost of attempting to deal with climate change.

During the past 20 years, world oil consumption has averaged approximately 70 million barrels a day (mpdb). In 2005, consumption is expected to be just under 84 mbpd, 20 per cent up. So to have any measurable impact on global warming, oil consumption would have to be cut hugely and quickly, Dumas said. Two thirds of oil demand growth is in developing Asia, as China, where dirty coal is the chief form of fuel and greenhouse gas emission, India and the Pacific Tigers are taking over much of the world's manufacturing and construction output.

The report warns: "Either this Asian release of record numbers of people from poverty - one of the great achievements of the past 20 years - will have to be reversed, or cuts in oil usage will have to be extremely sharp in developed economies".

No serious economic cost-benefit analysis will ever recommend taking the radical steps required to prevent global warming, the Lombard Street Research study says.

Dumas said: "The proposed Kyoto treaty limits would in no way prevent global warming. In reality, nobody seriously proposes a cure for global warming, because adequate measures would cause economic catastrophe and probably world war."

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