We are on the cusp of a new growth era, one where growth is driven by the interaction between rapid technological innovation, sustainable infrastructure investment and increased resource productivity. Ambitious climate action across key economic systems—energy, cities, food and land use, water and industry—can lead to higher productivity, more resilient economies and greater social inclusion. It is the growth story of the 21st century.
Yet we are not making progress fast enough in embracing this growth model. The next 10-15 years are a unique use-it-or-lose-it moment for both the economy and climate. The world will invest $90 trillion in infrastructure by 2030, more than the current stock in place globally today. How that infrastructure is built will be a major determinant of future prosperity for both people and the planet. It is also a key moment to turn the tide on climate change. Already, 18 of the last 19 years have been the warmest on record. Disasters triggered by weather- and climate-related hazards were responsible for thousands of deaths and $320 billion in losses last year. This summer, record-breaking heatwaves, wildfires and extreme flooding turned deadly and caused billions in damages. Unless we make a decisive shift now to a low-carbon economy, we risk the enormous costs of runaway climate change.
Today, the New Climate Economy launches its 2018 report, Unlocking the Inclusive Growth Story of the 21st Century: Accelerating Climate Action in Urgent Times. It demonstrates the benefits of a new low-carbon growth model and outlines how we can urgently accelerate efforts to achieve it. Bold action could yield a direct economic gain of $26 trillion (cumulative) by 2030 compared with business-as-usual. And this is a conservative estimate. Ambitious climate action could also generate more than 65 million new low-carbon jobs in 2030—equivalent to the entire workforces of the UK and Egypt combined—and could avoid more than 700,000 premature deaths from air pollution by 2030.
The next 2-3 years are a critical window when many of the policy and investment decisions that shape the next 10-15 years will be taken. The Global Commission on the Economy and Climate calls on leaders in government, business and finance to prioritize urgent action on four fronts:
1) Ramp up efforts on carbon pricing and move toward mandatory disclosure of climate-related financial risks.
Major economies should put a price on carbon of at least $40-80 per ton of CO2 by 2020, along with a predictable rising pathway by 2030. Already, 70 countries, states and provinces have carbon prices in place or planned, covering 20 percent of global greenhouse gas emissions. Major economies should also lead the way in phasing out fossil fuel subsidies and harmful agricultural subsidies and tax breaks by 2025.
Fossil fuel subsidy reform and carbon pricing alone could generate an estimated $2.8 trillion in government revenues per year in 2030, equivalent to the GDP of India today. These funds could be used to invest in urgent public priorities.
Accelerating efforts to disclose climate-related financial risks is essential to deliver radical transparency and shift much-needed finance toward low-carbon solutions. More than 390 companies—including investors with assets of a combined market capitalization of more than $7 trillion—have already publicly committed to support the Task Force on Climate-related Financial Disclosure’s recommendations, and a number of them are starting to apply them in their financial disclosures.
2) Accelerate investment in sustainable infrastructure.
Ensuring that infrastructure investments are sustainable is critical. The G20 should continue its work to develop infrastructure as an investment asset class to improve the mobilization of private and long-term finance. Multilateral development banks should double their collective investment in infrastructure, making sure it is sustainable, aiming to invest at least $100 billion per year by 2020.
3) Harness the power of the private sector and unleash innovation.
By 2020, all Fortune 500 companies should establish emissions-reduction targets in line with what scientists say is necessary to prevent the worst climate impacts. Already, more than 460 companies across all sectors have committed to Science-Based Targets.
A big push on innovation is needed, such as on deforestation-free supply chains or net-energy positive commercial buildings. We need at least $50 billion of new capital committed to breakthrough climate challenges by 2020.
4) Build a people-centered approach that shares gains equitably and ensures that the transition is just.
All governments should establish clear Energy Transition Plans to reach net-zero energy systems. They should work with energy companies, trade unions and civil society groups to ensure a transition to a low-carbon economy doesn’t place unfair burdens on workers and communities.
Women will play a critical role in this agenda. Ensuring their full participation in the economy could boost global GDP by as much as $28 trillion per year by 2025.
A greater focus on adaptation and resilience across efforts and policies is critical as climate impacts continue to negatively affect lives and livelihoods. We can no longer choose between actions for today and those for tomorrow.
The Future We Want
Leaders are already seizing the exciting economic and market opportunities of this new growth approach. The laggards are not only missing out on these opportunities; they’re putting us all at greater risk.
We can deliver on the promise of this new growth era. We can eliminate extreme poverty, prevent dangerous climate change, and improve the lives and livelihoods of millions—but only if we set out to do so decisively now. As this new report makes plain, we have everything to lose and so much to gain.
The Global Commission on the Economy and Climate is a major international initiative that was set up in 2013 to help governments, businesses and society make better-informed decisions on how to achieve economic prosperity and development while also addressing climate change. The Commission, currently chaired by Ngozi Okonjo-Iweala, Paul Polman and Lord Nicholas Stern, comprises leaders from over 20 countries, including former heads of government and finance ministers, leading businesspeople, heads of international organizations, city mayors and academics. They all serve on the Commission in a personal capacity.
Reuters
OSLO/LONDON (Reuters) – Strong action to combat climate change could cumulatively add at least $26 trillion to the world economy by 2030, according to a study on Wednesday which seeks to dispel fears that a shift from fossil fuels will undermine growth.
The Global Commission on the Economy and Climate, which includes former heads of government, business leaders and economists, said there was “unprecedented momentum” toward greener growth that would boost jobs and countries’ economies. Bold climate action could deliver at least $26 trillion in net cumulative benefits from now until 2030 compared with business as usual, it said.
“There’s still a perception that moving toward a low-carbon path would be costly,” lead author Helen Mountford told Reuters. “What we are trying to do with this report is once and for all put the nails in the coffin on that idea.” The commission’s study adds detailed projections since it first issued a report in 2014 to highlight economic opportunities from a shift away from fossil fuels.
Smarter investments in cleaner energy, cities, food and land use, water and industry would generate tens of millions of new jobs annually — around 65 million new jobs in 2030, equivalent to the workforces of Egypt and Britain combined, the study said.
A shift from fossil fuels to cleaner energies such as wind and solar power would avoid 700,000 premature deaths from air pollution in 2030, it added.
The report recommended high prices on carbon dioxide emissions of $40-$80 per tonne by 2020 in major economies. Subsidy reforms in the energy sector, coupled with higher carbon prices, could raise $2.8 trillion a year in government revenues in 2030, it said.
Former Mexican President Felipe Calderon, honorary chair of the Commission, said it was “a manifesto for how we can turn better growth and a better climate into reality”. Co-chairs include Paul Pohlman, chief executive of consumer goods group Unilever, and Professor Nicholas Stern of the London School of Economics.
476,000 people are now employed in wind and solar power in the United States.
Despite signs of climate action the report said “we are not making progress fast enough” to limit a rise in temperatures linked to more floods, heat waves, wildfires and rising sea levels.
We could shift to sustainability and save $26 trillion. Why are aren’t we doing it? The costs of the status quo keep rising; the costs of sustainable alternatives keep declining.
$26 Trillion, according to the most authoritative research to date, is the amount of money humanity could save through a global shift to sustainable development.
It’s a lot of money. Before you break your brain trying to imagine it, just pause to make a note that it’s a positive sum (uh, extremely positive), not negative. Net savings, not costs.
That might come as a surprise since decades of conservative and fossil fuel propaganda have made it conventional wisdom that cleaning up our act is expensive — that it costs more than the status quo. It is the argument hauled out against every single pollution regulation.
The argument has always been false on a sufficiently long time scale. Sooner or later, humanity must live sustainably or it won’t go on living — that’s what “sustainable” means. And any fundamental shift toward sustainability is enjoyed by all subsequent generations of humans, so, y’know, the value compounds. If there are any people left in the year 5000, the question of whether it was “worth it” to shift to sustainable practices will strike them as peculiar indeed.
But there were ways to make the shift look expensive in the short to mid-term, especially since the prices of the fuel, food, and materials we use do not reflect their environmental damage. And traditional modeling and cost-benefit analysis have always been weighted in favor of the status quo, since the costs of new, more sustainable systems are apparent and their second- and third-order benefits are difficult to predict or quantify. (Innovation is the X-factor in all modeling.) But these days, it has gotten almost impossible to make sustainability look like a bad deal. Two forces are acting as a pincer, making the decision more and more obvious.
First, the future damages of climate change are coming into clearer focus, and, more to the point, the damages have arrived, here in the present, in brutal fashion.
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And second, the costs of sustainable technologies and practices (e.g., solar panels) have fallen at a dizzying rate in recent years, especially in the energy sector.
The costs of the status quo keep rising; the costs of sustainable alternatives keep declining. How do they currently balance out? That brings us back to the $26 trillion.
A comprehensive look at climate risks and sustainable alternatives, at current costs
The Global Commission on the Economy and Climate was created in 2013 to examine how the international community could achieve its development goals within the constraints imposed by climate change. It is a Davos-friendly collection of former government officials (like Mexico’s Felipe Calderón), along with experts in business and economics (like famed climate economist Nicholas Stern), funded by a set of seven governments (not including the US), though it operates independently.
Its flagship project, the New Climate Economy, is a sprawling collaborative effort involving a core team and numerous participating research institutes. It has resulted in three big comprehensive reports so far, along with several smaller country- and industry-specific reports. Unlike the IPCC, with its interminable layers of bureaucracy and review, NCE can crank out work relatively quickly and use up-to-date cost data.
All of which is to say that its fourth big report — the 2018 New Climate Economy Report, out Wednesday — is the closest thing to a state-of-the-art look by experts at the risks and opportunities posed to human beings and their economies by climate change.
Its key findings will be familiar to aficionados of such reports:
- Time is running out; extreme damages from future climate change are being locked in. If humanity isn’t on a sustainable trajectory by 2030, limiting global warming to 2 degrees Celsius — the common international target — will be rendered impossible.
- The developing world needs tons of new infrastructure; the developed world has tons of infrastructure nearing the end of its life span. That means the world is on the verge of an enormous infrastructure boom that will lock in emissions outcomes for the next 50 to 100 years. The next few years are vital: “The world is expected to spend about US$90 trillion on infrastructure in the period up to 2030, more than the entire current stock today. Much of this investment will be programmed in the next few years.”
- In all five areas the report closely examined — energy, cities, food/land use, water, and industry/innovation/transport — shifting to sustainable technologies and techniques would save trillions of dollars through 2030 in increased productivity, innovation, and reduced health costs. Sustainability costs less.
- The impacts of climate change and the impacts of a transition to sustainability will both be concentrated in particular countries and communities, so every policy and infrastructure decision needs to be made with equity in mind.
- Progress is underway in many areas, especially in energy, but it is patchwork, inconsistent, and entirely insufficient to achieve shared long-term goals.
- Policymakers worldwide need to price carbon, roll back fossil fuel subsidies (and other policies that impede sustainability), invest in sustainable infrastructure, harness the private sector, and protect vulnerable communities.
At over 200 pages, the report is nothing if not comprehensive. In each of the five areas of the economy, the researchers go deep, make granular recommendations, and quantify the exact benefits of sustainability over the status quo. For instance, on cities:
More compact, connected, and coordinated cities are worth up to US$17 trillion in economic savings by 2050 and will stimulate economic growth by improving access to jobs and housing. They can strengthen resilience to physical climate risks and could deliver up to 3.7 gigatons per year of CO2e savings over the next 15 years, just shy of the total emissions of the European Union (EU) today.
If you’re an energy nerd, dig in — this is an all-you-can-eat buffet. Beyond the currency and comprehensiveness of the effort, a couple of features of the report jumped out at me.
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Current models and projections underplay the benefits of transition
The first — related to an enduring obsession among climate wonks — has to do with the limitations of existing modeling.
The researchers are frank: “Current economic models are deeply inadequate in capturing the opportunities of such a transformational shift, or the grave dangers of climate inaction,” they write. “We need a new class of economic models that can capture the powerful dynamics at play, including transformative technological advances, preservation of essential natural capital, and the full health benefits of cleaner air and a safer climate, including the containment of pandemic diseases.”
Indeed! In energy, my personal guess is that by 2030, it will be very clear that we grossly underestimated the benefits and opportunities unlocked by smart, connected, distributed energy technologies — all the widgets and ways we will use to better measure, manage, and share the abundance of cheap renewable energy.
Similarly with transportation. With the benefit of quieter, safer, more livable cities and better respiratory health, we’ll wonder why we ever put up with anything else — why we nickel-and-dimed the transition to electric buses, long-haul trucks, and passenger vehicles; why we fought over every bike lane and rail line.
Economic models keep misleading us in ways that slow the transition to sustainability. So we need new economic models that better capture the real choices we face.
The barrier — now, as always — is “leadership”
The second (another enduring obsession) has to do with why the transition continues to move so slowly.
The report goes to great lengths to make clear that we have the tools we need. The technologies and practices that serve sustainability are already at work in some places — just not broadly or consistently across the world. We know how to do it. It’s just a matter of scaling up the solutions, quickly, across sectors, regions, and countries. If we don’t — if we continue on our incremental, inconstant path — the results will be disastrous:
If countries move tentatively: there will be no breakthrough on carbon pricing and innovation; some, but not all, cities will be built in a sustainable, resilient, and inclusive way; rainforests will continue to be slashed, albeit at a slower rate; power grids will be decarbonised but only where it’s easy to do so. Although this is progress, it is nowhere near close to enough and will lock us into an unsustainable growth path, with global warming of potentially more than 3° C, severely disrupting the lives and livelihoods of billions, from residents of coastal Asian megacities to farming communities in America.
That’s about as plainly as it can be put. (The report’s language is admirably blunt throughout.)
While new technological and market tools will always be welcome, what’s needed now is policy. Lots and lots of policy, in lots and lots of places.
“Economic decision-makers, especially in the policy world, now need to step up,” it says.
Why isn’t that happening?
“What is currently lacking is sufficient political and business leadership,” it says.
And there you have it: right where reports like this always end up. We know what needs to be done. We have the tools. The numbers have been run. The economic arguments are solid. The choice is clear.
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Here’s hoping our cleverness can defy gloomy forecasts again
The report notes that “amazing technological and market progress has been seen in the last few years, well beyond what most of the traditional economic models projected.”
But it pivots immediately to the wonk’s dream: “How much more can be achieved in the coming years with clear, consistent policy signals?” While we may never see perfect, rational policy coordination, over time, distributed here and there, animated by the same challenges, clever humans will figure out ways to solve these problems, defying gloomy forecasts that simply project the status quo. We will surprise ourselves. At least that’s where I put my hopes these days.
