A worldwide transition to low carbon fuels could save the global economy as much as $1.8 trillion over the next two decades, according to two reports published Thursday by the Climate Policy Initiative.

By switching to renewable energy sources, the high costs associated with extracting and transporting coal and gas could be avoided, the reports, titled Moving to a Low Carbon Economy: The Financial Impact of the Low-Carbon Transition, and Moving to a Low Carbon Economy: The Impact of Different Policy Pathways on Fossil Fuel Asset Values, conclude.

This would free up funds to bolster financial support for wind, solar and other renewables – with enormous sums left over, the reports conclude. Following an approach aimed at capping climate change at 2 degrees Celsius will require walking away from massive reserves of fossil fuels, stranding the assets of major corporations, many researchers have warned. The new reports give this issue a closer look, demonstrating that more than half of the assets at risk are actually owned by governments not corporations.

This finding could be double-edged, since that means taxpayer money in many countries is at stake and those governments have the power to establish policies that could promote or repudiate the fossil fuels they control. But the reports’ conclusion that trillions could be freed up if governments and private companies abandon those assets could make it easier for governments to leave those fossil fuels in the ground.

“For policymakers around the world wondering whether the transition to a low-carbon economy will help or hurt their countries’ ability to invest for growth, our analysis clearly demonstrates that, for many, the low-carbon transition is a no-brainer,” said Tom Heller, executive director of the Climate Policy Initiative. “It not only reduces climate risks, its benefits are clear and significant.”

Even in the U.S., where fossil fuels are predominantly privately held instead of owned by the government, a switch could be provide billions in benefits. A well-managed transition away from oil could provide “a net benefit to the financial system of more than $300 billion” for the U.S. alone, the researchers concluded.

By working to reduce the financing costs associated with building renewable energy plants, the U.S. and Europe could bring the costs of low-carbon power like solar or wind down by 20 percent, the reports calculate. The resulting price drop would make wind and solar competitive with fossil fuels for electricity generation, it adds.

The reports particularly focuses primarily on the coal industry, arguing that a transition away from coal could drive carbon dioxide emissions down by 80 percent, while only representing 12 percent of the total fossil fuel assets at risk.

“Transitioning away from coal is a cost effective path to a low carbon economy,” the researchers wrote. “Policies in the US and Europe combating air pollution have put these regions on a path that will limit the risk of future losses in coals plants’ value. To limit asset stranding, China and India need alternatives to building planned coal fired power plants.”

But the report also is singularly focused on carbon dioxide, leaving out entirely the climate effects of methane, a greenhouse gas that is 86 times more powerful than carbon dioxide during the first two decades after it hits the atmosphere. Methane leaks from natural gas production could completely wipe out the climate change benefits of a switch from natural gas to coal.

While the report endorses the notion that natural gas could serve as a bridge to a low carbon future, it does so tepidly and only for some countries. “Gas can be a bridge fuel for some regions until 2030,” the researchers wrote. “This is particularly true for China and India but to limit loss in asset value, global usage of gas would need to decrease after this time.”

While most of the international debate over climate change has focused on the parts per million of carbon dioxide in the atmosphere, the shale gas rush has sparked concern that methane leaks from the nation’s growing shale gas infrastructure, like the web of pipelines used to transport the gas to market, could push the climate past a tipping point and into runaway global warming where no amount of policy changes can prevent catastrophic temperature rises.

Purely based on the carbon dioxide emitted from burning natural gas, the Institute found that natural gas use must peak in 2030.

This recommendation is at the outer edges of the transition time called for by the Center for American Progress last year, which concluded natural gas consumption must peak between 2020 and 2030, based on calculations that took some of the risks from methane into account.

The Climate Policy Initiative was founded in 2009 and funded by hedge fund billionaire George Soros. Headed by environmental lawyer Thomas Heller, who helped author the United Nations’ Intergovernmental Panel on Climate Change’s third and fourth assessments, the Initiative is especially focused on the financial questions surrounding climate change.

The New Climate Economy project commissioned the twin reports as part of the research conducted for the Global Commission on the Economy and Climate, which counts among its members not only former heads of state like Filippe Calderon, but also the chairman of Bank of America and the executive director of the International Energy Agency, meaning that the recommendations in the twin reports could prove highly influential among a broad array of global leaders.

While the global economy stands to benefit enormously from a switch away from fossil fuels, these savings are far from assured, the CPI warned. “Transitioning from oil to low-carbon transport could increase global investment capacity by trillions” the institute wrote, “or result in net costs, depending on policy choices.” While reducing the use of oil for transportation will be beneficial for countries that import, oil exporters could be hurt unless they prepare and make a switch of their own.

In part, the climate problems we face today are the result of financial policies pursued for decades, the report notes.

“Ultimately, the global economy needs to address century-old imbalances borne from years of structuring the economy around fossil-fuel derived energy,” the Institute wrote. “Policy decisions made today will direct the course of the economy for years to come.”