G20 will put sustainable growth at risk if it fails to spend on measures to tackle climate change during economic crisis

The G20 countries should invest in measures to tackle the current economic crisis and re-orient development towards sustainable, low-carbon growth, according to a report published today (26 March 2009) by the Potsdam Institute for Climate Impact Research and the Grantham Research Institute on Climate Change and the Environment.

The report, ‘Towards a Global Green Recovery: Recommendations for Immediate G20 Action’, was written by a team led by Ottmar Edenhofer and Nicholas Stern, and commissioned by the German Foreign Office ahead of the summit of G20 leaders in London on 2 April.

The report states: “The world is facing its worst economic crisis in many decades, caused by massive strains in the global financial system, falling asset prices and a sharp drop in wealth and aggregate demand. To re-start growth, ambitious fiscal stimulus measures have been announced in most G20 member countries and further measures are under consideration. The need for a substantial fiscal boost in the short term provides a great opportunity to undertake projects with a high social return, at a time when inputs are relatively cheap and underutilised resources and workers are available. But additional measures should be timely, well targeted, and taken within a clear long-term framework if they are to help lay the foundations of sustainable growth in the medium and long term without threatening fiscal sustainability when recovery comes.”

It concludes: “Public spending aimed at stimulating private investments that help reducing greenhouse gas emissions can perform very well against these criteria for an effective stimulus, while providing the additional benefits of lower energy costs and increased energy security.”

Professor Edenhofer said: “Ensuring that national recovery programmes are ‘green’ makes sense not only because climate change poses a far more serious threat to the global economy in the long term than do temporary economic downturns. It also makes sense because otherwise, once the world economy recovers, sharply increasing energy prices are likely at some stage to trigger subsequent slowdowns. Without the transition towards a low-carbon global energy system, the next economic crisis is pre-programmed.”

Lord Stern said: “It is essential for the G20 countries to lead the fight against both the global recession and climate change. The G20 are responsible for three-quarters of the world’s wealth, energy consumption and greenhouse gas emissions. They have the means to both tackle the economic crisis and lay the foundations of sustainable low-carbon growth in the future. A global green recovery, led by the G20, can deliver immediate and long-term economic benefits, cut the risk of dangerous climate change, reduce energy insecurity and competition for natural resources, and prepare the ground for a successful post-Kyoto agreement in Copenhagen in December 2009.”

The report warns that “G20 members should avoid the additional risks that would be incurred by investing in infrastructure that locks economies into high-carbon paths”. It identifies seven areas in which economic recovery plans should be focused: increasing energy efficiency; upgrading physical infrastructure, for example in the energy sector; supporting clean technology markets; initiating flagship projects, such as large-scale demonstration plants for carbon capture and storage; enhancing research and development for low-carbon technologies; incentivising investments by pricing carbon across all sectors and regions; and co-ordinating G20 efforts to lay the foundations of sustainable growth.

The report calls for G20 members to “initiate and extend programmes that provide loans to home-owners and small and medium-sized enterprises for boosting energy efficiency in buildings”, and “undertake investments in electricity grid upgrades and extensions, public transportation, integrated freight transport systems and carbon dioxide pipelines for carbon capture and storage projects”.

It suggests that the G20 should “facilitate the financing of clean-technology projects by providing and expanding feed-in tariffs, renewable portfolio standards, and production tax credits, guarantees and loans”. They should “reaffirm their commitment to an open trading system and refrain from discriminatory provision in national stimulus packages”.

 Notes for Editors

1. The Potsdam Institute for Climate Impact Research (PIK) was founded in 1992 and now has a staff of about 210 people. At PIK, researchers in the natural and social sciences work together to study global change and its impacts on ecological, economic and social systems. They examine the Earth system’s capacity for withstanding human interventions and devise strategies for s sustainable development of humankind and nature. Through data analysis, computer simulations and models, PIK provides decision-makers with sound information and tools for sustainable development.
2.  The Grantham Research Institute on Climate Change and the Environment was established at the London School of Economics and Political Science in 2008. The Institute brings together international expertise on economics, as well as finance, geography, the environment, international development and political economy, to create a world-leading centre for policy-relevant research, teaching and training in climate change and the environment. It is funded by The Grantham Foundation for the Protection of the Environment.