Research Press Release

Climate change: Global energy spending changes in a warming world


October 14, 2021

Climate change may lead to a modest net reduction in global annual energy expenditures by the end of the 21st century, according to a study published in Nature. However, the changes in spending would differ across regions according to the local climate and economy, with substantial increases in expenditure predicted in some tropical and subtropical regions that are able to invest in cooling methods.

Previous estimates of the impact of warming on energy expenditure have suggested that costs would increase substantially, but the models used to make these predictions may not have been sufficiently constrained by data. Solomon Hsiang and colleagues estimated future changes in energy consumption and spending by combining data on global energy consumption, energy costs and historical climates, with population and income projections and climate projections under scenarios of moderate and high emissions of greenhouse gases.

The researchers estimate that by the end of the 21st century, net savings on energy expenditure due to climate change could amount to 0.17% or 0.08% of the world’s GDP under high and moderate emission scenarios, respectively. They calculate that for every ton of carbon dioxide released into the atmosphere today, annual energy expenditures may decrease by between US$1 and US$3 by 2099. Spending on electricity is projected to increase in tropical and subtropical middle-income regions, such as portions of India, China and Mexico, due to use of cooling methods such as air conditioning. However, the results suggest that this spending could be offset by decreases in spending on fuels such as coal and natural gas for heating in high income, colder countries. Low income regions, including much of sub-Saharan Africa, may be less able to invest in cooling methods than higher income regions, but are also projected to decrease spending on heating.

The reduction in global annual energy expenditures projected in this study is not good news, given that income inequities largely explain this result, Katrina Jessoe and Frances Moore reiterate in an accompanying News & Views. They note that poorer countries could increase their use of air conditioning sooner than projected if the cost falls and infrastructure improves. Climate change may also affect energy systems and raise the cost of supplying electricity, they add. “Quantifying how warming will affect energy infrastructure and the cost of supplying energy is the next crucial step towards understanding climate-change impacts in the energy sector”, Jessoe and Moore conclude.


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