04/14/2014 01:46 pm ET Updated Jun 14, 2014

The 3 Numbers You Need to Know About the Cost of Climate Change

The cost numbers for climate change are now in, thanks to the scientists and economists who have spent the last five years working on a series of blockbuster reports for the Intergovernmental Panel on Climate Change (IPCC). And the picture is as clear as mud. So, for those of us watching from the cheap seats, here are the three numbers you need to know.

First up is the number from the "Working Group II" of the IPCC, released a couple weeks ago in Yokohama. That report detailed the cost estimate for the damages due to climate change. The headline here is that we are already stuck with a bill. The authors spelled out a partial accounting for the cost of 4.5 degrees Fahrenheit of warming, which totals up to as much as "2.0 percent of income." Essentially this is the price tag for the delay to date. We are already committed to a warming of about 3.5 degrees Fahrenheit due to the sunk investments in the current carbon polluting infrastructure -- e.g. all those coal-fired power plants belching away carbon pollution that just can't be shut down overnight. This is an annual bill, to be paid year in and year out for many years into the future.

However, the "good" news is that limiting warming to 3.5 degrees Fahrenheit (or 2 degrees Celsius, considered by some to be the safe limit of climate change) is still doable, according to the IPCC Working Group I authors who released their report in Stockholm back in September of last year. And the truly good news is that this is an extremely affordable option, according to IPCC Working Group III authors who just released their report in Berlin. And don't worry, there are no Working Group IV authors.

The report recently released tells us that limiting warming to 3.5 degrees Fahrenheit would mean that consumption in the future will be a tiny bit less than we might have hoped for in a world without climate change. The difference will be "0.06 percentage points in annual consumption growth," i.e. rather than the 3 percent growth in consumption that we had expected on the high side, we will get a growth of 2.94 percent if we move aggressively to cut carbon pollution. This number is the cost to limit warming to just a bit more than the warming in the pipeline. If "0.06 percentage points" sounds extremely small, that's because it is. It's really a rounding error. Cutting carbon pollution to avoid climate catastrophe means we will have to wait until 2051 or 2052 to get the total growth we had expected to get by 2050.

Why so cheap you ask? The short answer is that the cost of clean energy has plummeted in recent years, and that quite frankly it was never that expensive in the big scheme of things. Wall Street financiers and bankers are now calling solar power a "disruptive technology." The utilities are running scared as they watch their business model fall apart. Who wants to buy power from a utility when rooftop solar is cheaper? The problem is that the fossil fuel industry isn't going to go quietly into the night. For example, there are plenty of financing mechanisms for utility-scale, coal-fired power plants, but financing for roof-top solar? Not so much.

The catch is that we have to move fast. Carbon pollution is building up quickly in the atmosphere. And if we don't make the switch to clean energy soon we will have to suck carbon pollution out of the atmosphere to keep warming from overshooting the "safe" level. That is not cheap. It's extremely expensive.

Of course, we can always opt out of the very minor investments required to avoid disastrous climate change. We can accept instead the losses of warming currently on track to reach 7 degrees Fahrenheit or more. Though that may sound like not that terribly much, the costs that go with 7 degrees Fahrenheit of warming are commonly called "catastrophic." In fact, they might more accurately be called cataclysmic. After all, 7 degrees Fahrenheit is close to the warming that brought the planet out of the last ice age, remaking the face of the world. But who wants to be called an alarmist?

The IPCC authors don't provide a total cost estimate for a 7 degrees Fahrenheit world, the third and final number required for our cost-benefit analysis. The problem is that the economic models simply break down when it comes to calculating the costs of runaway climate change. The losses are so complete that the production equations upon which the economic models depend just don't work. There is little income or consumption when the human infrastructure and natural ecosystems upon which all production depends collapse.

We don't have much choice about whether to pay for the cost of the warming already in the pipeline. That bill is unavoidable. The choice we still have is whether to make the minor investments needed to limit warming to 3.5 degrees Fahrenheit, or whether we'd rather keep going down the fossil-fuel road to 7 degrees Fahrenheit and beyond. And that is a choice that has nothing to do with economics and everything to do with politics.