I used to work for a consulting firm you may have heard of. McKinsey & Co. So, when I saw they came out with a report a couple of days ago on the cost of completely combating climate change globally, I took a long look at it.
Of considerable interest is what the report says about the impact on the cost of electricity. While there would naturally be variations by country, the report projects that electricity would generally be twenty-five percent more expensive around the year 2040, in real terms, and settle down to twenty percent more expensive around 2050.
A twenty-five percent increase, or even a twenty percent increase, would be significant; no question about that. Especially on households that find it difficult paying today’s energy bills as is discussed in the above essay.
Yet, when you consider the cost of climate change itself, as the report appropriately emphasizes, and if society takes extra measures to mitigate the effect on low-income communities, then you begin to think this just might be doable. Still, raising electricity’s expense by twenty to twenty-five percent can give one pause.
Fortunately, in the U.S., what we have paid for electricity in recent years has been at or around its all-time low. As measured in terms of the percent of what consumers spend in total on all goods and services.
The numbers for calendar year 2021 come out tomorrow from the U.S. Bureau of Economic Analysis. But they’ll likely be about 1.3 percent. That is, about one in seventy-seven dollars spent by American households goes towards paying electric bills.
Since this percent is historically low, if it rose twenty to twenty-five percent to cover the cost of combatting climate change, this might drive up the percent of consumer spending to, perhaps, 1.5 to 1.6 percent.
Yes, 1.5 to 1.6 percent is much higher than the present. But it’s lower than where it was most years since the government started reporting this stat in the year 1959.
